Prior studies have reported that companies making rights issues in the UK exhibit a significant underperformance in the period following the offering. Using a sample of rights issues covering the period 1988-1998, we investigate the pre-and post-offering performance for equity issuers. Our results suggest that managers issue equity when securities are significantly overvalued; while, investors re-adjust their beliefs regarding issuing firms’ future potential in a gradual basis rather than within the issuing period as suggested by market efficiency. Overall, the evidence presented here is consistent with both the ‘asymmetry of information’ and ‘window of opportunities’ hypotheses.
|Title of host publication||Investment in a global economy: its evironment, finance and economics|
|Place of Publication||Athens, Greece|
|Number of pages||56|
|Publication status||Published - 2008|