Why are rights offers in Hong Kong so different?

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• 作者：Chin-Chong Lee^a ; ^{chinchong.lee@newinti.edu.my" class="auth_mail} ; Wai-Ching Poon^b ; Jothee Sinnakkannu^b
• 关键词：Rights issues ; Private equity placements ; Private benefits of control ; Agency costs
• 刊名：Pacific-Basin Finance Journal
• 出版年：January, 2014
• 年：2014
• 卷：26
• 期：Complete
• 页码：176-197
• 全文大小：492 K

文摘

Investors react adversely to the announcements of rights offers in Hong Kong and the abnormal return of rights offers on the announcement day is 鈭?#xA0;12.10%. After taking price discounts, underwriting fees and abnormal returns into consideration, the total direct and indirect costs of the seasoned issuers of rights offers are tremendously high. The cross-sectional analysis shows that investors react more adversely to the issuers of rights offers with lower growth prospects, higher free cash flows, larger issue scales, lower pre-issuance stock run up and higher debt capacity. Our empirical result also indicates that cash-rich firms with few investment opportunities and firms with poor quality in terms of lower market-to-book ratio and larger price discounts choose rights offers over private equity placements. All this evidence supports that agency costs and private benefits of control matter in equity financing.