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An Analysis of Nonunderwritten Rights Offers: The Case of Closed‐END Funds
Author(s) -
Miles James A.,
Peterson Mark A.
Publication year - 2002
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/1475-6803.t01-1-00003
Subject(s) - shareholder , equity (law) , equity capital , business , raising (metalworking) , finance , closed end fund , capital market , economics , monetary economics , corporate governance , law , geometry , mathematics , political science , market liquidity
We study nonunderwritten rights offerings without subscription pre‐commitments from large shareholders. The results indicate firms incur substantial indirect costs in the form of price concessions for raising equity capital this way. The data therefore support the selling cost explanation of the rights‐offering paradox. Additionally, we describe how market participants collectively respond to intermediate such offerings.