Seasoned equity issues in a closely held market: evidence from FranceReport as inadecuate

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1 DRM - Dauphine Recherches en Management

Abstract : This paper examines seasoned equity offerings in France. Even though a rightsoffering is the primary flotation method, French companies are increasingly using therelatively expensive public offering method. We show that the market reaction to theannouncement of seasoned equity issues is significantly negative for rights issues andinsignificantly negative for public offerings. Our results suggest that the adverseselection effect is greater for rights issues than for public offerings, due to strongerunderwriter certification for the public offerings. We find that the share price effect ispositively related to blockholders take-up renouncements for firms with priorconcentrated ownership. For these firms, the favourable ownership dispersion effectoffsets the adverse selection effect.

Keywords : ownership structure seasoned equity issues flotation methods ownership structure.

Author: Edith Ginglinger - Jean-François Gajewski



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