scholarly journals The issuance of warrants in rights offerings: Agency costs and signaling effects

2017 ◽  
Vol 42 (4) ◽  
pp. 608-636 ◽  
Author(s):  
Balasingham Balachandran ◽  
Sutharson Kanapathippillai ◽  
Chandrasekhar Krishnamurti ◽  
Michael Theobald ◽  
Eswaran Velayutham
Keyword(s):  
Agency Costs ◽  
Equity Issuance ◽  
Growth Opportunities ◽  
Market Reactions ◽  
Quality Signals ◽  
Rights Offering ◽  
Rights Issues

We examine the issuance choice across rights issues of equity, unit offerings, and standalone warrants and investigate the market reactions to these issue types. We find that agency costs, growth opportunities, and current funding needs relative to assets in place are prime drivers of the type of equity issuance choice. Managers use quality signals such as underpricing, underwriting status, and the proportion of funds raised by exercising warrants in determining the features of the warrant issue. Furthermore, we document that the market reacts more favorably to standalone warrants issues than units and equity during the rights offering period.

scholarly journals Measuring the agency costs of dispersed ownership: the case of repurchase initiations

2014 ◽  
Vol 11 (3) ◽  
pp. 30-49
Author(s):  
Ruth Gesser ◽  
Rony Halman ◽  
Oded Sarig
Keyword(s):  
Stock Prices ◽  
Media Coverage ◽  
Agency Costs ◽  
Market Reaction ◽  
Cash Flows ◽  
Payout Policy ◽  
Conclusive Evidence ◽  
Market Reactions ◽  
Repurchase Announcements ◽  
Dispersed Ownership

Empirical investigations of the agency costs of dispersed ownership yield mixed results. A possible explanation for the lack of conclusive evidence is inaccurate measurement of the extent of the problem. We suggest that the extent of the problem be measured as theory suggests: by the wealth that managers commit to their firms. We examine the relative performance of different measures of the agency problem of dispersed ownership in the context of changes in payout policy affected by repurchase initiations. We find that the suggested measure – managerial equity wealth – can explain better than any other measure the market reaction to repurchase initiations. We also find that market reaction to repurchase initiation is smaller for firms with high media coverage than for firms with low media coverage and that repurchases that follow a large rise in stock prices elicit relatively small market reactions. Lastly, we find that market reaction to repurchase announcements decreases with the dividend yield of the firm, which suggests that share repurchases are relatively less important when dividends are used to alleviate the problems of free cash flows. Our results are robust to several modifications of the main test.

scholarly journals Agency costs and the size discount: evidence from acquisitions

2010 ◽  
Vol 15 (29) ◽  
pp. 73-93
Author(s):  
David Offenberg ◽  
Keyword(s):  
Agency Costs ◽  
Statistical Tests ◽  
Negative Relationship ◽  
Tobin’S Q ◽  
Large Firms ◽  
Growth Opportunities ◽  
Tobin's Q

Many scholars have found a negative relationship between a firm’s size and its value, as measured by Tobin’s q. This result is called the size discount. There are hypotheses about why the size discount exists, but none have been rigorously empirically tested. This paper argues that the size discount is created by the inability of shareholders to minimize agency costs in larger companies. Statistical tests suggest that the size discount only appears in large firms with managers that impose excessive agency costs upon their shareholders. Empiricists who use Tobin’s q to proxy for growth opportunities may need a different proxy.

scholarly journals PENGARUH KEBIJAKAN DIVERSIFIKASI DAN KARAKTERISTIK PERUSAHAAN TERHADAP NILAI PERUSAHAAN BUMN JASA KONSTRUKSI

ETIKONOMI ◽  
2012 ◽  
Vol 11 (1) ◽  
Author(s):  
Eddy Irsan Siregar
Keyword(s):  
Firm Size ◽  
Firm Value ◽  
Agency Costs ◽  
Negative Impact ◽  
Analysis Method ◽  
Growth Opportunities ◽  
Panel Data Regression ◽  
Data Regression ◽  
Size Growth ◽  
Positive Effect

The aim of this study is to obtain the influence of diversification policy and firm’s characteristics to the construction state owned enterprises (SOEs) firm’s value. The firm’s characteristics on this study are based on firm size, growth opportunities, and agency costs on some construction state-owned enterprise in Indonesia. The analysis method used in this research was panel data regression. These results indicate that the value of the company was affected by the company characteristic and it diversification. The entire independent variables such as diversification, firm size, growth opportunities, and agency costs had a significant effect on firm value. Business diversification and agency costs had a negative impact on firm value. Firm size and growth opportunities had a positive effect on firm value.DOI: 10.15408/etk.v11i1.1869

A Rent-Protection Explanation for SEO Flotation-Method Choice

2016 ◽  
Vol 51 (3) ◽  
pp. 1039-1069 ◽  
Author(s):  
Xueping Wu ◽  
Zheng Wang ◽  
Jun Yao
Keyword(s):  
Asymmetric Information ◽  
Firm Value ◽  
Equity Issuance ◽  
Announcement Effect ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
Method Choice ◽  
Flotation Method ◽  
Rights Issues

AbstractWe model how a rent-protection motive drives the choice of flotation method in new equity issuance between two polar cases: rights issues and cash offers. Unexpected new blockholders would emerge in control-diluting cash offers and share in jealously guarded control benefits. But rights issues help the incumbent controlling shareholders avoid control dilution and safeguard their private benefits. Under asymmetric information about private benefits, the choice of flotation method can convey information about hidden private benefits and hence firm value. Our model can explain even a negative announcement effect of rights issues, and it supports not just one but three important equilibriums.

scholarly journals Comparative analysis of company market reactions on right issue for pay debt and investment

2019 ◽  
Vol 6 (3) ◽  
pp. 29-37
Author(s):  
Putu Sri Arta Jaya Kusuma ◽  
Gerianta Wirawan Yasa
Keyword(s):  
Comparative Analysis ◽  
Market Reaction ◽  
Stock Exchange ◽  
T Test ◽  
Market Reactions ◽  
Analysis Techniques ◽  
The Right ◽  
Rights Issue ◽  
Right To Buy ◽  
Rights Issues

The right issue is the issuance of new shares conducted by companies where the right to buy new shares is given to the old shareholders. Funds from the rights issue can be used by companies for various purposes, namely paying off debt and investment. In this study wanted to test the market reaction to the announcement of the rights issue aimed at paying off debt and rights issues aimed at investment and comparing the market reaction to the rights issue aimed at paying off debt and investment. The research was conducted on companies listed on the Indonesia Stock Exchange (IDX) and which issued rights issues in 2015-2017 with a sample of 76 rights issues. The analysis techniques used were one sample t-test and independent sample t-test. Based on the results of the study, it was found that there was a positive market reaction to the rights issue aimed at investment. Whereas in the rights issue aimed at paying debt there is no market reaction. This research also proved that there was no difference in the market reaction to the rights issue aimed at paying off debt and investment.

scholarly journals Pengaruh Akuisisi dan Right Issue terhadap Abnormal Return Saham

2020 ◽  
Vol 4 (1) ◽  
pp. 278-289
Author(s):  
Elsye Fatmawati ◽  
Laela Nur Azizah
Keyword(s):  
Stock Price ◽  
Abnormal Return ◽  
Quantitative Methods ◽  
Sample Selection ◽  
Secondary Data ◽  
Rank Test ◽  
Market Reactions ◽  
Significant Difference ◽  
Before And After ◽  
Rights Issues

Rights issues and acquisitions are important information for shareholders that can be used to gain future profits and measure market reactions. This reaction can be measured using an abnormal return. This study aims to see whether there are significant differences before the acquisition and rights issues. The population in this study were companies listed on the IDX that carried out acquisitions and rights issues in 2015-2019. This research is a descriptive study using quantitative methods. The sample selection technique in this study is purposive sampling. By following the predetermined criteria, 9 companies were selected as samples. The type of data used is secondary data from yahoo finance 2015-2019, daily stock price data, and daily Composite Stock Price Index (IHSG) (Close Price). Hypothesis testing Paired Sample T-Test and Wilcoxon Signed Rank Test using the SPSS 22.0 program. The results of this study indicate that there is no significant difference in returns in the period before and after the announcement of the acquisition and the rights issue.

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