Article2006

Long‐Term Performance Following Rights Issues and Open Offers in the UK

Proches Ngatuni · John Capstaff · Andrew P. Marshall

33 citations0/0 files storedJournal of Business Finance &amp Accounting

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

Abstract: This study finds evidence of significant long‐term underperformance following rights issues made during 1986‐95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991‐95 show strong positive performance over a 5‐year post‐issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986‐90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991‐95, a period when open offers were more commonly used.

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References

1993Common risk factors in the returns on stocks and bonds 1984Corporate financing and investment decisions when firms have information that investors do not have 1992The Cross-Section of Expected Stock Returns 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1997A Survey of Corporate Governance 1996Agency costs of free cash flow, corporate finance, and takeovers 1986Large Shareholders and Corporate Control 1995The New Issues Puzzle

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2007Discounts in Placing Pre‐renounced Shares in Rights Issues 2007The Importance of the Sequence in UK Rights Issues 2011Long Term Performance and Choice of SEO Method by UK Firms 2008Seasoned equity offerings, operating performance and overconfidence: Evidence from the UK 2015Intended Use of Proceeds, Underwriter Quality and the Long‐run Performance of SEOs in the UK 2014Rights Offerings and Expropriation by Controlling Shareholders

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