Rights Offerings and Expropriation by Controlling Shareholders
Journal of Business Finance and Accounting, Forthcoming
Posted: 12 Jan 2014
Date Written: January 7, 2014
We investigate rights issues and open offers in Hong Kong. We observe that the greater the severity of firms’ management-agency problems, the more unfavourably shareholders tend to react, leading to more negative cumulative abnormal returns or rights forfeiture. Controlling shareholders do not forfeit rights, and may increase their percentage ownership at deep price discounts by underwriting rights offerings. Our results suggest that, although certain rights offerings can be described as value-enhancing, many other rights offerings closely resemble the expropriation activities of controlling shareholders.
Keywords: rights issues, open offers, corporate governance, event study
JEL Classification: G14; G32; G34
Suggested Citation: Suggested Citation