DP11987 Choices in Equity Finance A Global Perspective
|Author(s):||Moqi Groen-Xu, Massimo Massa, Virginie Mataigne, Theo Vermaelen|
|Publication Date:||April 2017|
|Keyword(s):||liquidity of rights, rights issue, seasoned equity offer|
|JEL(s):||G14, G32, G38, K22|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11987|
Equity issues can be structured as cash or rights offers and depending on the country's legislation firms can allow or restrict tradability of the rights. We study these choices using a worldwide sample of equity issues announced in 127 countries. We consider whether these choices as well as the short and long-term stock returns can be explained by a number of hypotheses proposed in the literature. The empirical findings confirm that the issuing method is driven by adverse selection and financial distress concerns, while the tradability decision reflects execution risk as well as transactions costs.