Why underwrite rights offering? Some new evidence

Article Abstract:

The wide use of underwriting rights offerings despite the lower flotation cost of uninsured rights mirrors the value-maximizing efforts used by managers of issuing firms. In anticipation of low shareholder takeup, the issuers turn to underwriters for quality certification in order to avoid the high selection cost of the rights offer method. The trend is consistent with the model rational flotation method choice developed by Ecko and Masulis in 1992.

Capital Management-Stock Sales, Management, Economic aspects, Investment banks, Stock offerings

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Adverse selection and the rights offer paradox

Article Abstract:

A study was conducted to analyze corporate equity flotation methods and rights offers by US exchange-listed firms. Results show that the selection between uninsured rights, rights with standby underwriting and firm-commitment underwriting is conditioned by information constraints, shareholder needs and direct flotation costs. These results imply the impact of stock-related variables for stock-price behavior.

Stockholders, Stock rights, Stockholders' preemptive rights

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Seasoned public offerings: Resolution of the 'new issues puzzle'

Article Abstract:

The new issues puzzle with regard to public offerings is examined.

Risk assessment, Practice

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