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Article in Journal

Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

Citation
Armitage S, Dionysiou D & Gonzalez A (2014) Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?, Journal of Business Finance and Accounting, 41 (5-6), pp. 743-772.

Abstract
This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets.

Keywords
seasoned equity offer; discount; inelastic demand; open offer; placing

StatusPublished
AuthorsArmitage Seth, Dionysiou Dionysia, Gonzalez Angelica
Publication date06/2014
Publication date online15/05/2014
PublisherWiley-Blackwell
ISSN 0306-686X
LanguageEnglish

Journal
Journal of Business Finance and Accounting: Volume 41, Issue 5-6

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