
Stock market liquidity and the rights offer paradox
Riva, Fabrice; Ginglinger, Edith; Koenig-Matsoukis, Laure (2009-01), Stock market liquidity and the rights offer paradox, 22nd Australasian Finance and Banking Conference, 2009-12, Sydney, Australie
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Communication / ConférenceDate
2009-01Conference title
22nd Australasian Finance and Banking ConferenceConference date
2009-12Conference city
SydneyConference country
AustraliePages
28
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Show full item recordAbstract (EN)
This paper contributes to the resolution of the rights offer paradox, using a database of French SEOs. We first document higher direct flotation costs, but also improved stock market liquidity after public offerings and standby rights relative to uninsured rights. We find that blockholder renouncements to subscribe to new shares and stock market liquidity are important determinants of flotation method choice. After controlling for endogeneity in the choice of flotation method, we find that public offerings are cost effective and more liquidity improving than standby rights whereas an uninsured rights offering is the best choice for low liquidity, closely held firms. Our results provide new insights as to why firms choose public offerings despite apparently higher costs.Subjects / Keywords
bid-ask spread; Security offering; SEO; flotation method; flotation costs; rights issues; public offerings; liquidityRelated items
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