To read this content please select one of the options below:

Rights Issues: The Importance Attached by Private Shareholders to the Issue Price in a Rights Issue

Management Research News

ISSN: 0140-9174

Article publication date: 1 April 1982

172

Abstract

As explained by the majority of text books that deal with the subject, perfect market theory illustrates that the issue price in a rights issue is irrelevant to the short term wealth of the shareholder. Empirical evidence would suggest that stock markets react to rights issues in a manner that is not inconsistent with the theoretical model. A rights issue can be perceived to be part new issue and part scrip issue, and the greater the discount, that is, the lower the subscription price, the greater the scrip issue element. Most people would accept that a scrip issue only cuts the corporate pie into smaller pieces and does not represent a fundamental change to the net wealth of the shareholder.

Citation

Keef, S.P. (1982), "Rights Issues: The Importance Attached by Private Shareholders to the Issue Price in a Rights Issue", Management Research News, Vol. 5 No. 2, pp. 15-16. https://doi.org/10.1108/eb027803

Publisher

:

MCB UP Ltd

Copyright © 1982, MCB UP Limited

Related articles