Which Investors Leave Money on the Table? Evidence from Rights Issues
41 Pages Posted: 2 Oct 2008
Date Written: May 25, 2008
This study documents patterns of investor behavior around Finnish rights issues. We find that shareholders of issuing companies lost at least €9.9 million in aggregate from 1995 to 2002 by exercising rights too early, selling rights in the open market below their intrinsic value, or leaving rights unexercised. At the investor level, the losses are modest. For example, the median household investor suffered a loss of €135 from not exercising or selling the rights. Investors with small portfolios, inactive trading history, those who know neither of the official languages in Finland, or who are living abroad leave money on the table the most.
Keywords: Rights issue, investor behavior, investment mistake, warrant
JEL Classification: G32, D01
Suggested Citation: Suggested Citation