Choices in Equity Finance a Global Perspective

61 Pages Posted: 25 Apr 2017

See all articles by Moqi Groen-Xu

Moqi Groen-Xu

London School of Economics & Political Science (LSE)

Massimo Massa

INSEAD - Finance

Virginie Mataigne

Ghent University-Universiteit Gent - Department of Accountancy and Corporate Finance

Theo Vermaelen

INSEAD - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 2017

Abstract

Equity issues can be structured as cash or rights offers and depending on the country's legislation firms can allow or restrict tradability of the rights. We study these choices using a worldwide sample of equity issues announced in 127 countries. We consider whether these choices as well as the short and long-term stock returns can be explained by a number of hypotheses proposed in the literature. The empirical findings confirm that the issuing method is driven by adverse selection and financial distress concerns, while the tradability decision reflects execution risk as well as transactions costs.

Keywords: liquidity of rights, rights issue, seasoned equity offer

JEL Classification: G14, G32, G38, K22

Suggested Citation

Groen-Xu, Moqi and Massa, Massimo and Mataigne, Virginie and Vermaelen, Theo, Choices in Equity Finance a Global Perspective (April 2017). CEPR Discussion Paper No. DP11987. Available at SSRN: https://ssrn.com/abstract=2957526

Moqi Groen-Xu (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Virginie Mataigne

Ghent University-Universiteit Gent - Department of Accountancy and Corporate Finance ( email )

Bedrijfsfinanciering (RUG)
Kuiperskaai 55 E
Ghent, B-9000
Belgium

Theo Vermaelen

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

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