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- Title
The Valuation Effects of Announcements of Rights Offerings by British and German Banks.
- Authors
Jayanti, Subbarao V.
- Abstract
In this study, the share-price effects of announcements of rights issues by major British and German Banks is examined. In Europe, in contrast to the United States, rights issues are common and underwritten public equity offerings rare. I find negative share-price reactions to announcements of rights issues by both British and German banks. Consistent with the signaling issues is more unfavorable than for underwritten rights issues. Regardless of the type of rights issue, share-price reactions are not related to the size of the subscription discount or to characteristics of the issuing bank. There is no evidence in the study that market reaction to either type of rights offering is related to issuing firm characteristics. The market regards an uninsured rights offering as a negative signal, but retention of an underwriter to protect the bank against the possibility that the new issue will fail partially mitigates tis negative signal.
- Subjects
UNITED Kingdom; GERMANY; VALUATION; BANKING industry; FINANCIAL institutions; RIGHTS offerings
- Publication
Finance India, 2005, Vol 19, Issue 3, p887
- ISSN
0970-3772
- Publication type
Article