Seasoned Equity Offerings: Stock Market Liquidity and the Rights Offer Paradox

Journal of Business Finance and Accounting, Forthcoming

42 Pages Posted: 26 Oct 2012

See all articles by Edith Ginglinger

Edith Ginglinger

Université Paris-Dauphine, PSL Research University

Laure Koenig-Matsoukis

Université Paris-Dauphine

Fabrice Riva

Université Paris-Dauphine, PSL Research University

Multiple version iconThere are 2 versions of this paper

Date Written: October 26, 2012

Abstract

This paper examines the impact of market liquidity on seasoned equity offerings (SEO) characteristics in France. We find that, besides blockholders’ takeup, liquidity is an important determinant of SEO flotation method choice. We document higher direct equity offering flotation costs, but also improved stock market liquidity after public offerings and standby rights relative to uninsured rights. After controlling for endogeneity in the choice of SEO flotation method, we find that pure public offerings and standby rights are comparable in terms of direct costs and liquidity improvement. Our results provide new insights as to why firms choose public offerings despite apparently higher costs.

Keywords: Seasoned equity offering, SEO, flotation method, flotation costs, rights issues, public offerings, liquidity, bid-ask spread

Suggested Citation

Ginglinger, Edith and Koenig-Matsoukis, Laure and Riva, Fabrice, Seasoned Equity Offerings: Stock Market Liquidity and the Rights Offer Paradox (October 26, 2012). Journal of Business Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2167327

Edith Ginglinger (Contact Author)

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

Laure Koenig-Matsoukis

Université Paris-Dauphine ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75775
France

Fabrice Riva

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

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