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An investigation to the announcement impact from right issues on stock prices in the Dutch Capital Market

Onclin, Nick (2014) An investigation to the announcement impact from right issues on stock prices in the Dutch Capital Market.

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Abstract:This study examines the announcement impact (market reaction) from right issues on stock prices and investigates three hypothesis; Information Asymmetry hypothesis, Free-Cash-Flow hypothesis and the Window of Opportunity hypothesis. Data from 34 Dutch right issues is used from the period between the years 2001 and 2013. First, the announcement impact is examined and the announcement impact per industry. In general, a negative announcement impact is found and no significant deviation in the announcement impact was found for different industries. Then, evidence was found for the information asymmetry and partial evidence for the free-cash-flow hypothesis. It shows that high discount and big right issues signal bad information to the market, what results in greater negative stock performance. Also right issues that create a big difference in leverage result in greater negative stock performances. No evidence was found for the window of opportunity hypothesis. The results indicate that the market reaction in a “good” market does not differ from the market reaction in a “bad” market
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/65092
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