Rights Offerings Can Be Costly: Intraday Evidence from Non-Underwritten Rights Offerings

37 Pages Posted: 19 Mar 2007

See all articles by Mark A. Peterson

Mark A. Peterson

Southern Illinois University - Department of Finance

Date Written: March 15, 2007

Abstract

We study the trading dynamics associated with a sample of non-underwritten rights offerings by issuers that are effectively precluded from using an underwriter when issuing seasoned equity. Market microstructure evidence is consistent with shareholders and brokers actively intermediating these offerings using short selling strategies. Large negative returns during the offering period, wealth transfers from non-participating shareholders to intermediaries, and difficulties associated with shareholder intermediation may make the non-underwritten rights method relatively more costly and highly impractical for widely held firms.

Keywords: Rights offerings, Short selling, Financial intermediation

JEL Classification: G24

Suggested Citation

Peterson, Mark Anthony, Rights Offerings Can Be Costly: Intraday Evidence from Non-Underwritten Rights Offerings (March 15, 2007). Available at SSRN: https://ssrn.com/abstract=972124 or http://dx.doi.org/10.2139/ssrn.972124

Mark Anthony Peterson (Contact Author)

Southern Illinois University - Department of Finance ( email )

Mailcode 4626
Carbondale, IL 62901-4626
United States
618-453-1426 (Phone)
618-453-5626 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
205
Abstract Views
1,674
Rank
268,682
PlumX Metrics