Rights Offerings, Takeup, Renounceability, and Underwriting Status
40 Pages Posted: 17 Dec 2007 Last revised: 9 Apr 2008
Rights offerings in Australia provide valuable choices to the issuer in terms of both underwriting and renounceability. We formulate a set of hypotheses from a quality-signalling perspective, affording an analysis of the key interrelations between quality, underwriting status, renounceability, takeup, and subscription price discount. We analyse rights offerings from two perspectives: market reaction to rights announcements and identification of the factors driving the choice of issue type. Evidence strongly supports the relation between quality signals and issue type. Using a robustly constructed takeup variable, we establish empirical relations between takeup, underwriting status, and renounceability that differ significantly from those previously reported, but which are consistent with the hypotheses developed in this paper.
Keywords: Rights offerings, Takeup, Renounceability, Underwriting, Australia
JEL Classification: G12, G14, G15, G24, G32
Suggested Citation: Suggested Citation