The Impact of Regulation on the Seasoned Equity Offering Decision

40 Pages Posted: 6 Aug 2019

See all articles by Adrian Melia

Adrian Melia

University of Newcastle (Australia)

Paul Docherty

The Brattle Group

Steve Easton

University of Newcastle (Australia) - Newcastle Business School

Date Written: January 1, 2019

Abstract

The rarity of rights issues in the US makes it difficult to examine the choice between alternative seasoned equity offering methods (SEOs) in that market. In Australia, however, both rights issues and private placements are prevalent. We therefore use the Australian market to test whether regulation influences a firm’s choice between rights issues and private placements. When a firm decides to issue seasoned equity in Australia, regulation favours private placements if the issue is small or needs to be completed quickly. Consistent with regulations affecting the choice between SEO types, our empirical results provide evidence that firms in Australia are more likely to choose a private placement for small issues or when taking advantage of temporary periods of overvaluation.

Keywords: SEO, Regulation, Rights issue, Private placement

JEL Classification: G12, G14

Suggested Citation

Melia, Adrian and Docherty, Paul and Easton, Steve, The Impact of Regulation on the Seasoned Equity Offering Decision (January 1, 2019). Australian Journal of Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3428181

Adrian Melia (Contact Author)

University of Newcastle (Australia) ( email )

University Drive
Callaghan, NSW 2308
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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