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Long‐Term Performance Following Rights Issues and Open Offers in the UK
Author(s) -
Ngatuni Proches,
Capstaff John,
Marshall Andrew
Publication year - 2006
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2006.00653.x
Subject(s) - exploit , period (music) , sample (material) , term (time) , business , economics , political science , accounting , computer security , computer science , chemistry , physics , chromatography , quantum mechanics , acoustics
This study finds evidence of significant long‐term underperformance following rights issues made during 1986‐95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991‐95 show strong positive performance over a 5‐year post‐issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986‐90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991‐95, a period when open offers were more commonly used.