Rights offerings, takeup, renounceability, and underwriting status

B Balachandran, Robert Faff, M Theobald

Research output: Contribution to journalArticle

36 Citations (Scopus)

Abstract

Rightsofferings in Australia provide valuable choices to the issuer in terms of both underwriting and renounceability. We formulate a set of hypotheses from a quality-signaling perspective, affording an analysis of the key interrelations between quality, underwriting status, renounceability, takeup, and subscription price discount. We analyse rightsofferings from two perspectives: market reaction to rights announcements and identification of the factors driving the choice of issue type. Evidence strongly supports the relation between quality signals and issue type. Using a robustly constructed takeup variable, we establish empirical relations between takeup, underwriting status, and renounceability that differ significantly from those previously reported, but which are consistent with the hypotheses developed in this paper
Original languageEnglish
Pages (from-to)328-346
Number of pages19
JournalJournal of Financial Economics
Volume89
Issue number2
DOIs
Publication statusPublished - Aug 2008

Keywords

  • rights offerings
  • underwriting status
  • renouceability
  • takeup
  • ownership concentration
  • australia
  • market reaction
  • quality signals
  • issue type

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