Rights Offerings and Expropriation by Controlling Shareholders

18 Pages Posted: 26 Jul 2014

See all articles by Wai Ming Fong

Wai Ming Fong

The Chinese University of Hong Kong (CUHK) - Department of Finance

Kevin C. K. Lam

Hang Seng Management College; The Chinese University of Hong Kong (CUHK) - School of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: June/July 2014

Abstract

We investigate rights issues and open offers in Hong Kong. We observe that the greater the severity of firms’ management‐agency problems, the more unfavourably shareholders tend to react, leading to more negative cumulative abnormal returns or rights forfeiture. Controlling shareholders do not forfeit rights, and may increase their percentage ownership at deep price discounts by underwriting rights offerings. Our results suggest that, although certain rights offerings can be described as value‐enhancing, many other rights offerings closely resemble the expropriation activities of controlling shareholders.

Keywords: rights issues, open offers, corporate governance, event study

Suggested Citation

Fong, Wai Ming and Lam, Kevin C. K., Rights Offerings and Expropriation by Controlling Shareholders (June/July 2014). Journal of Business Finance & Accounting, Vol. 41, Issue 5-6, pp. 773-790, 2014. Available at SSRN: https://ssrn.com/abstract=2472217 or http://dx.doi.org/10.1111/jbfa.12069

Wai Ming Fong (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

Kevin C. K. Lam

Hang Seng Management College ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
662
PlumX Metrics