Explanations of Cycles in Seasoned Equity Offerings: An Examination of the Choice between Rights Issues and Private Placements

Melia, A., Chan, H., Docherty, P., & Easton, S. (2018). Explanations of cycles in seasoned equity offerings: An examination of the choice between rights issues and private placements. Pacific-Basin Finance Journal, 50, 16-25.

33 Pages Posted: 1 Aug 2019

See all articles by Adrian Melia

Adrian Melia

University of Newcastle (Australia)

H. Chan

University of Melbourne - Department of Finance; Monash University - Department of Accounting

Paul Docherty

The Brattle Group

Steve Easton

University of Newcastle (Australia) - Newcastle Business School

Date Written: 2018

Abstract

A feature of the Australian equity market is that, unlike all other equity markets, private placements and rights issues are used more frequently than public offerings. This study examines time-variation in these types of seasoned equity offerings (SEOs), to examine choice between them, and to enhance our understanding of the reasons for time-variation in SEOs. Time-variation in information asymmetry, the demand for capital, and investment sentiment, together with market timing, are explanations for this cyclicality in SEO issuance; although the drivers of time-variation differ across SEO types. Time-variation in the demand for capital has a statistically and economically significant impact on time-variation in private placements, while time-variation in investor sentiment has a statistically and economically significant impact on the prevalence of rights issues. Market timing and information asymmetry do not have explanatory power for variation in SEO activity.

Keywords: SEO; Rights issue; Private placement; Information asymmetry; Demand for capital; Investor sentiment; Market timing

JEL Classification: G1

Suggested Citation

Melia, Adrian and Chan, Howard and Docherty, Paul and Easton, Steve, Explanations of Cycles in Seasoned Equity Offerings: An Examination of the Choice between Rights Issues and Private Placements (2018). Melia, A., Chan, H., Docherty, P., & Easton, S. (2018). Explanations of cycles in seasoned equity offerings: An examination of the choice between rights issues and private placements. Pacific-Basin Finance Journal, 50, 16-25., Available at SSRN: https://ssrn.com/abstract=3428122

Adrian Melia (Contact Author)

University of Newcastle (Australia) ( email )

University Drive
Callaghan, NSW 2308
Australia

Howard Chan

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Paul Docherty

The Brattle Group ( email )

44 Brattle Street
3rd Floor
Cambridge, MA 02138-3736
United States

Steve Easton

University of Newcastle (Australia) - Newcastle Business School

City Campus East – 231
Newcastle-Upon-Tyne NE1 8ST, NE1 8ST
Australia

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