Why are rights offers in Hong Kong so different?

Selection Bias and the Underwriter Certification of the Largest Shareholders in Seasoned Equity Offerings

“…On the other hand, the offers underwritten by the largest shareholders of issuing firms and their associates are grouped under the category of the largest shareholders. 2 Lee et al (2014), Ching et al (2006), and Wu and Wang (2005b) find that the 3-day cumulative average abnormal return from day À1 to day 1 is more than À7.5%, but the average announcement return of the corresponding rights issues for industrial firms in the US and in the UK is only about À2.09% (Hansen 1988;Eckbo and Masulis 1992;Slovin et al 2000). 3 See Booth and Smith (1986), Blackwell et al (1990), Denis (1991), Hansen and Torregrosa (1992), Eckbo and Masulis (1992), Kumar and Tsetsekos (1993), Puri (1996), and Pandes (2010) for more details.…”

“…Lee et al . (), Ching et al . (), and Wu and Wang () find that the 3‐day cumulative average abnormal return from day −1 to day 1 is more than −7.5%, but the average announcement return of the corresponding rights issues for industrial firms in the US and in the UK is only about −2.09% (Hansen ; Eckbo and Masulis ; Slovin et al .…”

“…; Fong and Lam ; Lee et al . ). This significant portion of outstanding shares might lead to a greater likelihood of wealth expropriation by the largest shareholders from minority shareholders (La Porta et al .…”

“…The slope coefficient of Ln(M/B) is positive and significant for open offers, consistent with Lee et al . (). The financial firms, which are normally highly regulated and have low level of information asymmetries, are associated with less negative announcement effects.…”

“…() and Lee et al . () use CAR(0, 1). There are two reasons why CAR(0, 1) is chosen as our dependent variable.…”