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Rights offerings, trading, and regulation: a global perspective

Massa, Massimo, Vermaelen, Theo and Xu, Moqi (2013) Rights offerings, trading, and regulation: a global perspective. Financial Markets Group discussion paper, DP727. Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

We study rights offerings using a sample of 8,238 rights offers announced during 1995-2008 in 69 countries. Although shareholders prefer having the option to trade rights, issuers deliberately restrict tradability in 38% of the offerings. We argue that firms restrict rights trading to avoid the execution risk associated with strict prospectus requirements, a prolonged and uncertain transaction process, and the potentially negative information signaled via the price of traded rights. In line with this argument, we find that issuers restricting tradability are those with more to lose from reduced participation or that are more likely to face execution risk.

Item Type: Monograph (Discussion Paper)
Official URL: http://www2.lse.ac.uk/fmg/home.aspx
Additional Information: © 2013 The Authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
K - Law and Economics > K2 - Regulation and Business Law > K22 - Corporation and Securities Law
Sets: Departments > Finance
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: DP727
Date Deposited: 22 Jan 2014 15:55
URL: http://eprints.lse.ac.uk/55403/

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