Announcement Effects Of Rights Offering And Its Dilution

With the development of domestic stock market, many new and innovative financing channels have been put forth and employed. Rights offering, as one form of the Secondary Equity Offering, have increasingly been the first option for the listed companies that are eager for refinancing. Though bearing many merits, however, its strengths have not been fully explored by so many public corporations. For example, it has become the utilized agent for many immoral listed companies to grab money from the pocket of investors, whose negative effects on the healthy development of the stock market has been increasingly prominent. It is very urgent and necessitated to analyze rights offering's effect on the stock market theoretically in order to get thoroughly understanding of it and to safeguard the interests of shareholders, especially non-organizational shareholders.This paper is constituted by four chapters:The first chapter introduces the preliminary conditions of the rights offering in domestic stock market in detail and gives systematic description on the past rights offering instances. On the other hand, the author put forward the analysis objectives and emphasis that is to analyze rights offering's effect on stock price utilizing the investment theories.In the second chapter, the author presents domestic and overseas updated researching findings on rights offering theories and make systematic conclusion on these researching findings from different aspects. Meanwhile, the author also makes some analysis concerning the rules and regulations on write offering in the six consecutive stages.In the third chapter, the author makes empirical analysis concerning the rights offering announcement on the stock price employing event study method. Computing its abnormal returns on the announcement date or the event date of the issuing company using the market adjustment returns model which alternatively become the basis to compute the average abnormal returns and cumulative abnormal returns, as a result, we find that it is empirically significant that AAR and CAR are negative. This finding demonstrates that rights offering indeed bring some ill effect on the stock price, moreover, this phenomenon tends to disperse which conform to some overseas and domestic research findings. Furthermore, this chapter categorizes the samples into special treated and non-special treated, then employs the above techniques to make empirical test. Consequently, it appears that stock price of the special treated companies have more larger and frequent fluctuation but more stagnant which correlates with the special treatment to great extent.In the fourth chapter, the author inquires the way to reduce that breed effects on the stock. The author employs investment opportunity theory initiated by overseas scholars in order to effectively analyze factors that could reduce the effects of the rights offering. In this chapter, we give the definition to investment opportunity from P/E, Tobin Q, Returns On Equity, Price/Earnings, Dividends/Earnings. The author executes strict and delicate descriptive statistic analysis on the sample employing quantizes categorization and R2 to derive the hypothesis on which the author establishes mathematical models. After the above process, we get three parameters that significantly affect the stock price on the announcement date which are pre-write offering annual Returns On Equity, Price/Earnings and Dividends/Earnings. Hereafter, some tailored advices is put forward concerning these three factors.There are some innovations in the paper. First, the author divides the sample companies into two parts when analyzing the rights offering's effects on the stock price, those are special treated and non-special treated, and makes comparison between them. Second, the author introduces investment opportunity theory into research on rights offering and makes some empirical analysis which together avail a new thinking on rights offering of listed companies and enrich relevant findings on issues of domestic corporate financing to some extent. Third, in this paper the author employs many methods to verify investment opportunity issues of rights offering on different viewpoints which provide authentic results on the rights offering of listed corporation.