Rights issue related discounts in France, Germany, Switzerland, and the United Kingdom

Diploma Thesis from the year 2008 in the subject Business economics - Law, grade: 1.3, University of Applied Sciences Hannover (Rights issues), language: English, abstract: This work primarily focuses on share price reactions resulting from rights issues in France, Germany, Switzerland, and the United Kingdom. Using a sample of 417 rights issues between 2000 and 2008 this study confirms earlier evidence that UK rights issue announcements exhibit a significant abnormal negative impact with an average of -2.51%. With a loss of with an average of -1.52% French rights issues had a clear abnormal negative impact, which, however, was lower than that of the UK. In contrast to these findings the recent rights issues in Germany and Switzer-land showed with an average impact of -0.67% and -0.04% no strong negative effect. However, the slightly negative effect of rights issue announcements in Germany and Switzerland clearly differs from earlier studies that that have reported abnormal positive effects. Therefore, the present results confirm predictions of a further equalisation of announcement effects initiated by the harmonisation of equity markets (including the elimination of tax advantages in Switzerland) and legal settings. Furthermore, this study in essence confirms the hypotheses of a positive correlation of debt ratio and of a negative correlation of discount for all four countries. In contrast, neither a clear correlation between announcement effects and P/E ratios nor more positive abnormal returns of announcement effects for rights issues in growth industries could be verified. Finally, no correlations between free float or market capitalisation or abnormal announcement returns have been found.