Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues

M.R. Kabir, P.G.J. Roosenboom

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper examines whether the stock market valuation impact of rights issues is consistent with subsequent operating performance of issuing firms. Analysing a sample of rights issues in the Netherlands, we find that a significant stock price decline takes place with the announcement of rights issues. We then analyse post-rights issue operating performance and find that, consistent with the decline in stock price during the announcement period, issuing firms also exhibit a significant decline in their operating performance. Our analysis thus demonstrates that the stock market can successfully anticipate future changes in operating performance of firms.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages33
Volume2000-22
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-22

Fingerprint

Equity
Stock market
Operating performance
Rights issues
Announcement
Stock prices
Stock market valuation
The Netherlands

Keywords

  • equity offerings
  • rights issues
  • valuation effect
  • firm performance

Cite this

Kabir, M. R., & Roosenboom, P. G. J. (2000). Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues. (CentER Discussion Paper; Vol. 2000-22). Tilburg: Finance.
Kabir, M.R. ; Roosenboom, P.G.J. / Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues. Tilburg : Finance, 2000. (CentER Discussion Paper).
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Kabir, MR & Roosenboom, PGJ 2000 'Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues' CentER Discussion Paper, vol. 2000-22, Finance, Tilburg.

Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues. / Kabir, M.R.; Roosenboom, P.G.J.

Tilburg : Finance, 2000. (CentER Discussion Paper; Vol. 2000-22).

Research output: Working paperDiscussion paperOther research output

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N2 - This paper examines whether the stock market valuation impact of rights issues is consistent with subsequent operating performance of issuing firms. Analysing a sample of rights issues in the Netherlands, we find that a significant stock price decline takes place with the announcement of rights issues. We then analyse post-rights issue operating performance and find that, consistent with the decline in stock price during the announcement period, issuing firms also exhibit a significant decline in their operating performance. Our analysis thus demonstrates that the stock market can successfully anticipate future changes in operating performance of firms.

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KW - rights issues

KW - valuation effect

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Kabir MR, Roosenboom PGJ. Can the Stock Market anticipate Future Operating Performance? Evidence from Equity Rights Issues. Tilburg: Finance. 2000. (CentER Discussion Paper).