Investor Protection and Choice of Share Issuance Mechanism
R. David McLean
University of Alberta - Department of Finance and Statistical Analysis
City University of Hong Kong (CityUHK) - Department of Accountancy
University 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
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, G34working papers series
Date posted: June 21, 2010 ; Last revised: January 27, 2013
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