Rights Offerings, Subscription Period, Shareholder Takeup and Liquidity
44 Pages Posted: 13 Jan 2010 Last revised: 15 Oct 2010
We examine the role of shareholder takeup in rights offerings on the subscription period price reaction and liquidity. Our results indicate that takeup information is reflected in price adjustments over the subscription period and that quality-related information disclosed on the rights announcement date further impacts upon prices in this period. Higher shareholder takeup improves liquidity. We do find some evidence of inefficiencies in the adjustment process over the subscription period which, in part, is consistent with a model where markets are characterized by overconfident investors and which also articulates with takeup information arriving in the market.
Keywords: Rights offerings, takeup, subscription period, underwriting, liquidity, Australia
JEL Classification: G14, G32
Suggested Citation: Suggested Citation