The Relationship Between the Rights Issue Terms and Post-Issue Stock Price Development in The Short, Medium and Long Term
(2024) NEKN02 20241Department of Economics
- Abstract
- This thesis investigates the relationship between the terms of rights issues and the subsequent
stock price development in the short, medium, and long term within the Nordic markets. Focusing
on rights issues conducted by companies in Sweden, Norway, Denmark, and Finland from 2014 to
2024, the study employs an event study methodology to analyze market reactions. Key variables
examined include the shares/rights exchange ratio, renounceability, Pari Passu status, discount to
the theoretical ex-rights price (TERP), the intended use of proceeds and financial performance
factors. The findings reveal that higher shares/rights ratios are perceived negatively, leading to
lower cumulative abnormal returns (CARs) due to concerns about... (More) - This thesis investigates the relationship between the terms of rights issues and the subsequent
stock price development in the short, medium, and long term within the Nordic markets. Focusing
on rights issues conducted by companies in Sweden, Norway, Denmark, and Finland from 2014 to
2024, the study employs an event study methodology to analyze market reactions. Key variables
examined include the shares/rights exchange ratio, renounceability, Pari Passu status, discount to
the theoretical ex-rights price (TERP), the intended use of proceeds and financial performance
factors. The findings reveal that higher shares/rights ratios are perceived negatively, leading to
lower cumulative abnormal returns (CARs) due to concerns about dilution. Conversely, the
inclusion of Pari Passu clauses positively influences investor confidence by ensuring equitable
treatment of new and existing shares, enhancing both short-term and long-term CARs. The
research underscores the importance of transparent communication regarding the strategic use of
raised capital and suggests that tailoring rights issue strategies to specific market conditions and
investor behaviors can optimize outcomes. This study contributes to corporate finance literature
by providing evidence-based recommendations for designing effective rights issue strategies that
align shareholder interests with corporate goals. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9160912
- author
- Grigoluns, Jaroslavs LU and Ingvarson, Måns LU
- supervisor
- organization
- course
- NEKN02 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Rights Issues, Theoretical Ex-Rights Price (TERP), Discount Pricing, Nordic Markets, Market Conditions, Shareholder Value, Market Response, Event Study, Abnormal Return.
- language
- English
- additional info
- Work conducted at the request and under the supervision of Nordea Bank Abp, Stockholm.
- id
- 9160912
- date added to LUP
- 2024-08-12 15:55:29
- date last changed
- 2024-08-12 15:55:29
@misc{9160912, abstract = {{This thesis investigates the relationship between the terms of rights issues and the subsequent stock price development in the short, medium, and long term within the Nordic markets. Focusing on rights issues conducted by companies in Sweden, Norway, Denmark, and Finland from 2014 to 2024, the study employs an event study methodology to analyze market reactions. Key variables examined include the shares/rights exchange ratio, renounceability, Pari Passu status, discount to the theoretical ex-rights price (TERP), the intended use of proceeds and financial performance factors. The findings reveal that higher shares/rights ratios are perceived negatively, leading to lower cumulative abnormal returns (CARs) due to concerns about dilution. Conversely, the inclusion of Pari Passu clauses positively influences investor confidence by ensuring equitable treatment of new and existing shares, enhancing both short-term and long-term CARs. The research underscores the importance of transparent communication regarding the strategic use of raised capital and suggests that tailoring rights issue strategies to specific market conditions and investor behaviors can optimize outcomes. This study contributes to corporate finance literature by providing evidence-based recommendations for designing effective rights issue strategies that align shareholder interests with corporate goals.}}, author = {{Grigoluns, Jaroslavs and Ingvarson, Måns}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Relationship Between the Rights Issue Terms and Post-Issue Stock Price Development in The Short, Medium and Long Term}}, year = {{2024}}, }