Seasoned Equity Offerings: Rights Issue versus Underwritten Commitment: The U.S. Economy in Perspective

Abstract:     
Capital is constantly being raised in the market to fund firm's expansion, acquisitions, and other strategies. Equity financing for established corporations comes primarily from additions to retained earnings. However, selling new common stock is an option. The issuance of additional shares can be executed by a choice between a rights offering or an underwritten commitment. For firms that have the preemptive right the rights method is obligatory. The remainder of firms, that do not have the preemptive right in their by-laws, have complete liberty to select either of the two methods to raise equity money.

Keywords: Equity financing, Rights offering, Underwritten commitment

JEL Classification: C23, G32, O51

Accepted Paper Series