Date
2012
Publisher city
Paris
Publisher
Université Paris-Dauphine
Collection title
Cahier de recherche FBF Chaire de Finance d'entreprise
Collection Id
2012-02
Dewey
Economie financière
Sujet
Seasoned equity offerings; Security offering; Selling activity; buying activity; price pressure; order imbalances; informative trading; manipulative trading; trading strategies; rights offers
JEL code
G24; G38; G39
Author
Koenig-Matsoukis, Laure
Type
Document de travail / Working paper
Item number of pages
32
Abstract (EN)
This paper provides evidence of informed trading before and after a rights issue. First, we find significant net buying and selling activity by informed traders prior to the announcement date leading to a temporary price pressure effect. Even though those results are consistent with the presence of short-term manipulative traders, we find little evidence of manipulative trading on announcement effects. Second, we show that informed traders are able to identify the issuer’s quality once all issue characteristics have been released. They trade in a direction consistent with their private information before and after the issue: they will buy (sell) shares in SEO firms with better (worse) post-issue price performance leading to a permanent price impact.