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Investor Protection and Choice of Share Issuance MechanismR. David McLeanUniversity of Alberta - Department of Finance and Statistical Analysis Tianyu ZhangCity University of Hong Kong (CityUHK) - Department of Accountancy Mengxin ZhaoUniversity of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis April 1, 2011 AFFI - French Finance Association , International Conference of the French Finance Association (AFFI) 2011 Abstract: Legal investor protection is associated with how firms choose to issue shares. The likelihood of private placements relative to rights offerings increases with investor protection, as does the likelihood of public offerings relative to both private placements and rights offerings. These findings are consistent with investor protection benefitting minority investors and reducing the benefits of control. Commonly used measures of equity market development are not associated with how shares are issued, nor are measures of market inefficiency. Our study helps shed light on several current issues in the literature, including choice of share issuance mechanism, how investor protection promotes finance, whether investor protection reduces ownership concentration, and the rights offering paradox.
Number of Pages in PDF File: 44 Keywords: Seasoned equity offerings, Rights offerings, Private placements, Mergers, Investor protection, Equity market development, Operating performance JEL Classification: G30, G31, G32, G34 working papers seriesDate posted: June 21, 2010 ; Last revised: January 27, 2013Suggested CitationContact Information
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