Open University of Tanzania, Dar Es Salaam, Tanzania; University of Strathclyde, Glasgow, United Kingdom; Department of Accounting and Finance, University of Strathclyde, 100 Cathedral Street, Glasgow G4 OLN, United Kingdom
Ngatuni, P., Open University of Tanzania, Dar Es Salaam, Tanzania; Capstaff, J., University of Strathclyde, Glasgow, United Kingdom, Department of Accounting and Finance, University of Strathclyde, 100 Cathedral Street, Glasgow G4 OLN, United Kingdom; Marshall, A., University of Strathclyde, Glasgow, United Kingdom
This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing Ltd.