Rights offerings, subscription period, shareholder takeup, and liquidity

Balasingham Balachandran, Robert Faff, Michael Theobald, Tony Van Zijl

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We examine the role of shareholder takeup in rights offerings on the subscription period price reaction and liquidity. Our results indicate that takeup information is reflected in price adjustments over the subscription period and that quality-related information disclosed on the rights announcement date further impacts prices in this period. Higher shareholder takeup improves liquidity. We do find some evidence of inefficiencies in the adjustment process over the subscription period that, in part, is consistent with a model where markets are characterized by overconfident investors and that also articulates with takeup information arriving in the market.
    Original languageEnglish
    Pages (from-to)213-239
    Number of pages27
    JournalJournal of Financial and Quantitative Analysis
    Volume47
    Issue number1
    DOIs
    Publication statusPublished - 2012

    Keywords

    • capitalists and financiers
    • corporations
    • stockholders
    • stocks

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