A theoretical and empirical analysis of the determination of the allocation ratio in standby underwritten rights offerings

In this study the irrelevance school of issue price is challenged and a theoretical model of optimal allocation ratio which explicitly takes into account various costs associated with rights offerings is developed. The empirical results reveal the importance of owners' subscription cost, the issuing firm's dividend policy, as well as the cost of administering share transfers in the determination of allocation ratio. The entirety of these results points, therefore, to the rejection of the irrelevance school of issue price and lend support to the three relevance school theories: the dividend policy cost theory of Levy and Sarnat, the transfer cost hypothesis of Beranek, and the cost of owner subscription hypothesis developed in this study.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Department dc:contributor.department

General Business

Grantor dc:publisher

Virginia Polytechnic Institute and State University

Year dc:date.issued

1982

Author dc:creator

• Ma, Tai

Chair dc:contributor.committeechair

• Hansen, Robert S.

Committee members dc:contributor.committeemember

• Keown, Arthur J.
• Pinkerton, John M.
• Young, W. Lewis, Jr.
• Lentner, Marvin

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/10919/87700

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/87700