Shareholder Nonparticipation in Valuable Rights Offerings

41 Pages Posted: 11 Nov 2012 Last revised: 9 Jan 2013

See all articles by Clifford G. Holderness

Clifford G. Holderness

Boston College - Department of Finance

Jeffrey Pontiff

Boston College - Department of Finance

Date Written: January 10, 2013

Abstract

Shareholder participation in domestic rights offerings averages only 64%, which is considerably lower than previously thought. This causes wealth transfers from nonparticipating to participating shareholders which average 7% of the value of the offering. Wealth transfers are larger in nontransferable, larger offerings. Offerings with lower shareholder participation tend to fall short in raising the capital sought. The stock market reacts more negatively to offerings with higher wealth transfers. It appears that small, non-sophisticated shareholders are less likely to participate. International evidence reveals that rights offerings are more prevalent in countries with institutional practices that limit such wealth transfers among shareholders.

Keywords: rights offering, shareholder heterogeneity, wealth transfers

JEL Classification: G32, G24, G15

Suggested Citation

Holderness, Clifford G. and Pontiff, Jeffrey, Shareholder Nonparticipation in Valuable Rights Offerings (January 10, 2013). Available at SSRN: https://ssrn.com/abstract=2173543 or http://dx.doi.org/10.2139/ssrn.2173543

Clifford G. Holderness

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-2768 (Phone)
617-277-8071 (Fax)

Jeffrey Pontiff (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
196
Abstract Views
969
rank
152,793
PlumX Metrics