Stock Market Liquidity and the Rights Offer Paradox

Edith Ginglinger, Laure Matsoukis and Fabrice Riva ()
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Laure Matsoukis: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Fabrice Riva: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper contributes to the resolution of the rights offer paradox, using a database of French SEOs. We first document higher direct flotation costs, but also improved stock market liquidity after public offerings and standby rights relative to uninsured rights. We find that blockholder renouncements to subscribe to new shares and stock market liquidity are important determinants of flotation method choice. After controlling for endogeneity in the choice of flotation method, we find that public offerings are cost effective and more liquidity improving than standby rights whereas an uninsured rights offering is the best choice for low liquidity, closely held firms. Our results provide new insights as to why firms choose public offerings despite apparently higher costs.

Keywords: Security offering; SEO; flotation method; flotation costs; rights issues; public offerings; liquidity; bid-ask spread (search for similar items in EconPapers)
Date: 2009-06
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Citations: View citations in EconPapers (3)

Published in EFMA Milan, Jun 2009, Italy. pp.xxx-xxx

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Related works:
Working Paper: Stock Market Liquidity and the Rights Offer Paradox (2009)
Working Paper: Stock Market Liquidity and the Rights Offer Paradox (2009)
Working Paper: Stock Market Liquidity and the Rights Offer Paradox (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00673289

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