Seasoned Equity Offerings: Rights Issue versus Underwritten Commitment: The U.S. Economy in Perspective
Raymond A.K. Cox
University of Northern British Columbia
Ram C. Aryal
RJT Compuquest, Inc.
Journal of Financial Management and Analysis, Vol. 20, No. 2, July-December 2007
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, O51Accepted Paper Series
Date posted: March 12, 2008
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