Investor Protection and Choice of Share Issuance Mechanism
44 Pages Posted: 21 Jun 2010 Last revised: 27 Jan 2013
Date Written: April 1, 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.
Keywords: Seasoned equity offerings, Rights offerings, Private placements, Mergers, Investor protection, Equity market development, Operating performance
JEL Classification: G30, G31, G32, G34
Suggested Citation: Suggested Citation