Determinants of Discounts in Equity Rights Issues: An International Comparison

37 Pages Posted: 8 Aug 2018 Last revised: 23 Jan 2019

See all articles by Nils Bobenhausen

Nils Bobenhausen

RWTH Aachen University - Chair for Business Administration, particularly Business Finance

Wolfgang Breuer

RWTH Aachen University

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management; RWTH Aachen University - Department of Finance

Date Written: January 21, 2019

Abstract

Equity rights offerings are the predominant SEO floatation method in many European and Asian countries. Several previous studies focus on rights offerings, but these studies often measure solely the announcement effects of these offerings and pay little attention to the discount. This study seeks to close this gap, explain the discounts on such rights offerings and determine the drivers of offering discounts with a focus on cultural effects regarding the level of uncertainty avoidance. Based on the existing literature, we develop several hypotheses and find supporting evidence for these hypotheses in our data. Our main finding is that the most important factors for explaining the discount on an equity rights offer are the level of uncertainty avoidance, the quality of a firm, and the level of uncertainty about firm value.

Keywords: Discount, equity rights offering, uncertainty avoidance

JEL Classification: G15, G32, G40

Suggested Citation

Bobenhausen, Nils and Breuer, Wolfgang and Salzmann, Astrid Juliane, Determinants of Discounts in Equity Rights Issues: An International Comparison (January 21, 2019). Available at SSRN: https://ssrn.com/abstract=3217606 or http://dx.doi.org/10.2139/ssrn.3217606

Nils Bobenhausen (Contact Author)

RWTH Aachen University - Chair for Business Administration, particularly Business Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

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