Rights Offerings and Corporate Financial Condition

22 Pages Posted: 19 Jun 2006

See all articles by Nancy D. Ursel

Nancy D. Ursel

University of Windsor - Odette School of Business

Abstract

Certain American industrial firms still use equity rights offerings. Most of these offerings are uninsured. I examine firms' financing decisions, and develop the explanation that rights offerings are used by firms in financial distress with difficulty accessing underwriting services. These firms have little to lose from the costs of adverse selection that accompany the lack of underwriter certification of uninsured rights offerings. Probit analysis of 660 seasoned NYSE, Amex, and Nasdaq equity issues between 1983-1999 yields results consistent with my explanation. There is no evidence that variables previously linked to rights usage (e.g., ownership concentration) continue to be relevant to the issue method choice.

Suggested Citation

Ursel, Nancy D., Rights Offerings and Corporate Financial Condition. Financial Management, Vol. 35, Issue 1, Spring 2006, Available at SSRN: https://ssrn.com/abstract=909668

Nancy D. Ursel (Contact Author)

University of Windsor - Odette School of Business ( email )

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