$4)-e~ - connecting repositories prefer retained earnings (available liquid assets) as their main...
TRANSCRIPT
RIGHTS ISSUES AND INVESTOR
RETURNS IN HONG KONG
by
LAU YIU FAI, LAWRENCE
MBA PROJECT REPORT
Presented to
The Graduate School
In Partial Fulfilment
of the Requirements for the Degree of
MASTER OF BUSINESS ADMINISTRATION
TWO-YEAR MBA PROGRAMME
THE CHINESE UNIVERSITY OF HONG KONG
May 1992
$4)-e~ Mr. Paul McGuinness
Advisor
i
ii
ABSTRACT
Rights issues are the common vehicles used to enlarge
the number of shares and capital in the Hong Kong equity
market. In order to investigate the sensitivity of the
stock prices before and after the announcement of rights
offerings, empirical analysis is performed. The revealed
materials will be valuable for the decision making of
investors and financial executives.
This study demonstrates that the announcement of
.equity· offerings reduces stock prices significantly. The
findings are consistent both with the hypothesis that
equity issues are viewed by investors as negative signals
about a firm's current performance and future prospects,
and with the hypothesis that there is a downward sloping
demand for a firm's shares.
Therefore, some argue that firms should time rights
issues to minimize the attendant adverse stock price
effects. Accordingly, firms tend to issue rights following
a rise in stock price, ' and this is when the rights issue
price reduction tends to be small.
Since the market · continually reacts to the public
announcem~nt of the news of rights issues, with the result
that investors are able to earn positive abnormal returns
by short selling the stock on the announcement date, if
possible.
TABLE OF CONTENTS
ABSTRACT . . TABLE OF CONTENTS . . ACKNOWLEDGEMENT
Chapter I. INTRODUCTION
Background Mechanism of Rights Issue . Underwriting ... Intrinsic Value of Rights . . Advantages of Rights Issues for Fund Raising . . . Trading Strategies for Shareholders •
11. METHODOLOGY OF ANALYSIS
Introduction and Literature Review Performing the Event Study (Announcement of Rights Issue) of the Hong Kong Stocks ..
Results Analysis Correlations Between Rates of Change in Stock Price During the Announcement Period and the Size of the Proceeds . . .
Results Analysis . . .. . . The Price effect of Rights Issues and the Total Net Assets of the Company. ....
Results Analysis . . . . . . Ill. CONCLUSION . . EXHIBITS
BIBLIOGRAPHY . .
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ii
iii
iv
1
2 6
10 14
15 16
17
17
22 27
28 33
34 35
37
40
44
iv
ACKNOWLEDGEMENT
It is a valuable chance for me to express my gratitude
to Mr. Paul McGuinness (my project advisor) for his
guidance and opinion. His kindness and help offered to me
are the indispensable constituents in my work.
Lastly, but not least, I would llke to thank for the
assistance from Mr. Barry Livett (a finance analyst). From
whom, I got the various feasible ways of how to find out
the corresponding data.
Lau Yiu Fai, Lawrence
1
CHAPTER 1
\
,INTRODUCTION
An enduring anomaly in financial economics is the
reliance of firms on internally generated funds as their
chief source of equity financing and their corresponding
reluctance to issue common stock. Myers (1984) suggested a
pecking order theory for capital structure. Firms are said
to prefer retained earnings (available liquid assets) as
their main source of funds for investment. Next in order of
preference is debt, and last comes external equity
financing. Firms wish to avoid issuing common stocks or
other risky securi ties so that they do not run into the
dilemma of either passing up posi ti ve NPV projects or
issuing stock at a price they think is low.
Financial executives, investment bankers and many
regulators argue that selling equity causes a firm's stock
price to fall. Their view, labelled the price-pressure
hypothesis by Scholes (1972), contends that an increase in
the supply of shares causes a decline in a firm's stock
price because the demand curve for shares is downward
sloping. Some commentators, Myers and Majluf (1983), also
argue that the managers and insiders have superior
information compared to general investors. The drop in
stock price is just the consequence of the informational
effect.
2
In Hong Kong, rights issue is one of the common
methods used to enlarge the number of shares and capital in
the equity market. Whenever there are rumours about
forthcoming rights offering, especially for the blue chips
such as Hong Kong & Shanghai Bank and Hutchison, the overall market will suffer
with the slim turnover. Actually, what is the scenario if
the rights issue comes true? As the investors' returns are
always influenced by the events of rights issues, it is
valuable to analyse the price variation of the underlying
stocks during the periods of the announcement.
Hence, this paper is trying to examine the effect of
rights issues on stocks in Hong Kong, with the view that it
would offer some hints for making an investment decision
for the investors.
Background
During the recent years, fund raising activities have
experienced a growing trend. Part of the reasons are : the
less rest~ictive listing requirements imposed by the Hong
Kong Stock Exchange (starting from June 1991)1, issuers'
risk averse attitude when approaching 1997 and the boom in
the stock market.
The Table 1 shows the amount of funds raised in recent
years in Hong Kongo It is clear that the rights issue takes
the significant role as the channel of funds raising.
1 A new applicant must have a trading record of not less than three years in the normal circumstances, and the prescribed percentage of securities to be in public hands is 25% for the market value of not exceeding HK$4000 million.
3
Table 1 Funds Raising Statistics
(Billion HK$) Year Placing Publicly listed Rights Issue Privatization Warrants Dividends
1989 5.154 3.368 4. 839 19.789 3.631 35.53
1990 11
11.403 1.7029 2.960 3.335 6.70 32.446
1991 I \
6.70 5.6143 10.514 ' 0.165 9.891 37.977
up to Mar. 15, 1992 5.018 "
(Source: Wah Po Investment Company)
Before detailing the operation of rights issue, it is
beneficial to examine how to issue additional shares for a
seasoned company, whose stocks have been outstanding for
some period of time. There are several ways for a company
to issue new shares, which include:
1. Bonus issues (capitalisation issues, stock
dividends) It is a technique for turning a
company's reserves or profits into share capital
without leading to any new capital
being raised. A capitalisation issue must be supported
by a circular to shareholders.
For example, a 20% bonus issue means that investors
receive 1 new share for every 5 already owned.
2. Share Splits - A split is where - the total nominal
value of the 'share capital remains unchanged but the
existing shares are replaced by a larger number of new
shares with a smaller nominal value.
The 20% bonus issue referred to is essentially the
same as a 6-for-5 stock split. All else being equal,
4
it should cause the stock price to go down to mln of
its previous value for an n-for-m stock split.
3. Consolidation - (exactly the reverse of a split)
It is where a new share is created by the oombination
of a defined number of old shares.
4. Direct Invitations - It is open to the general public.
The corresponding company approaches an issuing house,
arranging for the preparation of the prospectus,
advisory activities in setting price and underwriting.
Two methods are actually involved i) offer for
subscription - it is an offer to the public by or on
behalf of an issuer of its own securities for
subscription and ii) offer for sale - it is an offer
to the public by or on behalf of the holders or
allottees of securities already in issue or agreed to
be subscribed.
5. Placing2 (selective marketing) - The shares are not
offered to the general publ ic but are t placed' ie.
offered and sold privately to a number of
insti tutions, such as pension funds and insurance
companies. The placing will be made on behalf of the
company by an merchant bank.
6 • Warrants Since · warrants have some similarities
wi th nil-paid rights non-exercised options to buy new shares offered by the
rights issue, the characteristics of warrants are detailed.
2 By the definition from Hong Kong Stock Exchange : a placing is the obtaining of subscriptions for or the sale of I securi ties by an issuer or intermediary from or to persons selected or approved by the issuer .or intermediary.
5
The warrantholders can have the subscription rights to
subscribe in whole or in part but not in respect of
any fraction of a share for a fixed exercise price at
any time up to the maturi ty date. Any subscription
rights which have not been exercised on or before that
date will thereafter lapse and the warrants will cease
to be valid for any purpose.
For the issuing corporation, warrants provide a low
cost route to raise funds via the listing of deferred
equi ty. It can ,be a sweetener for the rights or bond
issue. To make a rights issue more attractive (and
successful), the issuing company would attach bonus
warrants to the nil -paid rights. After the issue is
subscribed, the warrants can then be detached for
separate listing. A warrant's exercise price is
usually pegged at a higher price than the share at the
time of issue. Thus, while the risk package offered to
the investor is attractive, the company is assured
that the funds injected in conversion will be at a
price in excess of that prevailing in the current
market.
Some Hong Kong warrant issues have been employed to
compensate investors when fund raising have run afoul
of difficult market conditions. Warrants can, under
certain conditions, provide a low cost means of
corporate control as surrogate of "B" shares. Majority
shareholders can reduce their holding in ordinary
shares and purchased outstanding warrants.
6
7. Rights issues - This is the preferred equity financing
vehicle of seasoned firms in Hong Kong as is indicated
in Tables 1 and 2. Its mechanism and characteristics
will be discussed in the following sections first.
Then in the latter part (Chapter 11), statistical
analysis of the announcement effects of rights issues
on the Hong Kong stocks would be followed.
Table 2 No. of Rights Issues in Hong Kong
Year
1985 1986 1987 1988 1989 1990 1991 1992 up to Mar.15
Number
10 12 27 21 17 13 18 10
Mechanism of Rights Issue
A right is an option offered pro-rata to all existing
shareholders to buy new shares from the issuing corporation
during a stated period at a stated price.
A right is evidenced by a certificate to shareholders
stating the number of rights shares that their present
ownership can claim. The company will also send out to all
of its shareholders circulars (prospectus: Exhibit 1)
explaining the terms of the rights issuance and giving
notice of the special general meeting at which a resolution
will be proposed to approve the rights issue. The document
also states the relevant terms :
1. number of rights offered for specific number of shares
or warrants held
7
2. subscription price (exercise price)
3. the expiration date of the rights offering
4. proposed use of the proceeds
A rights issue is not only conditional on the passing
at a special general meeting of the necessary resolutions
to approve an increase in authorised sharecapi tal, the
creation of new warrants but also depending on the granting
from the Stock Exchange.
To attract the shareholders, the exercised rights
sometime will be attached with bonus warrants or the
proceeds for the subscription can be paid by instalment.
The nil-paid rights are transferrable and negotiable
in the Stock Exchange. The duration of the trading of
rights is around ten days and ends with the expiration date
of the rights. Normally, fractional shares are not issued.
Many rights offerings include an oversubscription
privilege. The qualifying shareholders will have the right
to apply for rights shares in excess of their provisional
allotments on·a pro rata basis of any shares that are left
over after the termination of the offering.
Table 3 : Time Table for a Rights Issue 8
Taking the time table of the rights issuance of
"Evergo International Holdings (1991)" and its closing
stock prices as example
Announcement Date of Rights Issue
Record date for the Rights Issue
First day of dealings in nil paid rights shares
Last day of dealings in nil paid rights shares
Latest time for Acceptance & payment
14th Jan.
Fri. 8th Feb.
18th F b e •
28th F b e .
4:00pm 1st March
Refund cheque in respect ----------of wholly or partly
8th March
unsuccessful excess applications
Certificates for Rights ----------Shares posted on or before
11 th March
Tab 1 e 4 ~ff@filf@ Jlf!i)'fC El 7 /Hi§J 7rQJ111D1J~ 1&11J1hl'U X~ll/J@ @, 11 '@fi 2 ~t (1110 111 f&~ 1~ g 1111'0 1I~ 1J(J17D
9/1/91 10/1/91
11/1 14/1 15/1 16/1
1/2/91 4/2 5/2 6/2 7/2 8/2
18/2 19/2
Closing Stock Price
$ 1.89 1.84 1.83 1.72 Announcement Date 1.83 1.83
2.425 2.075 Ex-right Date (XR) 2.175 2 .• 15 2.175 2.15 Record Date
Closing price of nil-paid rights 2.225 1.06 2.275 1.22
9
There are several important days for a rights issue.
Record date (8th Feb.) is the date at which the
stockholders listed on the firm's stock record will be
mailed their rights. The ex-right date (stock sold without
subscription rights) is usually four business days before
the record date because the Stock Exchange requires some
time to clear the transaction. The market price of the
stock is likely to fall by the approximate value of a right
when the stock goes ex-rights.
A ready market in the rights usually develops,
permitting surplus rights to be sold or additional rights
purchased during the dealing days of nil paid rights shares
(1st day: 18th Feb. for Evergo's example). The dealings in
the Stock Exchange are subject to the payment of stamp duty
in Hong Kong. For some rights issues, the issuing companies
may not make to or satisfy the Listing Committee of the
Stock Exchange for listing of the rights shares in their
nil paid forms. In this way, no trading and negotiating
of the rights will be undergone.
Those who want to exercise rights, should send their
cheques accompanied with the application forms before the
latest time for acceptance (1st March in case of Evergo).
No commission is levied when the rights holder exercises
the rights and acquires new shares. The right shares, when
fully-paid, will rank pari passu in all respects with the
existing issued shares including the right to receive all
future dividends and distributions which may be declared,
made or paid. For the unsuccessful applications, cheques
10
will be refunded. The certificates for the Rights Shares
would be despatched to those entitled thereto on or before
11th March.
Underwriting
When a company makes a rights · offering, there are
usually several weeks between the ex-rights date and the
date offer expires. If the share price falls below the
issue price by the last acceptance date, shareholders will
not exercise their rights. To avoid the issues failing, the
company may deliberately set the issue price sufficiently
low or may arrange the underwriting. The underwriter(s)
makes a commitment to take up the unscribed portion of the
issue. Hereby the company is able to pass the major part of
risk to a syndicate of financial institutions. Some argue
that underwriters cause an increase in the stock price (1)
by increasing ' 'public confidence' through external
certificate of the legal, accounting, and engineering
analysis & (2) by the selling efforts of the underwriting
syndicate.
It should be noted that the underwri ting agreement
relating to the rights issue contains provisions entitling
the underwriters to terminate the obligations thereunder on
the occurrence of certain events, including force majeure,
or a material breach of the representations and warrants
contained in the underwriting agreement, occurring before
the second or third day following the last day for
acceptance and payment under the rights issue. For this
purpose, force majeure includes (but is not limited to) the
11
occurrence of any event or circumstances (political,
military, economic, or otherwise) which in the reasonable
opinion of the underwri ters is or will be or may be
materially adverse to the company or the issue of the
rights shares or any change in financial, political,
economic or market condi tions which will or may in the
reasonable opinion of the underwriters prejudicially and
materially affect the right issue. If the underwriters
exercise such right the Rights Issue will · not proceed. The
listing document mu-st contain full disclosure of the above
facts and state the consequential risks. 3
For an investor, he should notice that if new issue
was undersubscribed, the market share price will be
depressed under the exercise price for extended period. For
example, Dickson Concepts in August 1991 announced the
basis of Rts 1 fo ·r 2 at HK$5. 25. The final subscription
rate came out to be 68.7 % (Figure 1).
3 On 17th January, 1991, it was announced that hostilities had broken out in the Middle East involving Iraq and allied forces including amongst others the United states of America, the Kingdom of Saudi Arabia and Great Britain. Such an outbreak of hostilities would probably amount to a force majeure event. Accordingly, shareholders are urged to exercise extreme caution when dealing in shares and nil paid rights until the underwriting agreement becomes unconditional . .
8
7.5
7
, v
4.5
4
12
Figure 1. Share Price of Dickson Concept During August 13 to December 6, 1991. 4
Share Price of Dickson Concept (in 1991) with Subscription Price of HK$5.25
\ \
...... --.. ---.. -
I I I I I I I I I I J I I I I I I I I I I I I I I I I I I 111 I
Aug 15 19 21 23 28 30 3 14 16 20 22 27 29 Sept
5 4 t)
9 11 13 17 19 24 26 30 10 12 16 18 20 25 27
Date
~ Closing Stock Price . . Oc.1;ober 11, 1991 · $ 4.925 · October 26, 1991 · $ 4.775 · November 8, 1991 $ 4.95 November 19, 1991 $ 5.15 November 28, 1991 $ 5.15 December 6, 1991 $ 5.15
13
For reference, here submit the subscription rates of
the recent rights issues in Hong Kong (Table 5). The
figures show that the underwriters are not always necessary
to take the rest of the unscribed portion of the issues.
Table 5 Subscription Rates of some Rights Issues
1989 Harriman 114 %
1990 Chung Wha 66.8 % Success Holdings 109.7 % Winland Invest. 118.1 % Shun Ho Construct. 64.57 % Standard Lloyds 116.4 % Wah Sing Toys 133 %
Average Subscription Rate for year 1990 101.43 %
1991 Hopewell Holdings 101.45 % Crusader Holdings 102.5 % Huey Tai Int'l 127.1 % Rose Int'l 95.65 % Emperor Int'l 107.5 % Cheuk Nan 157 % Dickson Concept 68.7 % Regal Hotel 121.5 % Evergo Int'l 144 % Creative Invest. 129 % Novel Enterprise 125 % Swilynn Int'l 102.7 % Kee Shing 116.17 % Burwill Holdings 139.37 % Guangdong Invest. 121.5 %
Average Subscription Rate for year 1991 117.28 %
14
Intrinsic Value of Rights
Without considering the market and internal effect,
a drop in share price on the ex-right date is due to the
detach of rights after the record date
M e = Market price of stock goes ex-right
= Market price of stock rights on X R
where X represents number of rights offered to shares held R represents the value of a right
e.g. Rts 5 for 2 then X::: 5/2
Theoretically, once rights are being traded in the
HKSE, the rights' value depend on :
1. the market price of a share of underlying stock,
2. the subscription price S, and
3. the number (N) of rights needed to buy one new share
(N=l in Hong Kong)
The value of a right, when it is being traded in the '
market, is equal to
R = M--e - - S N
for Me > S
where Me is the price of stock on dealing date of rights.
If the subscription price is set close to the market value,
the value of rights will be so small that it constitutes a
nuisance for the existing owners of small and medium
holdings of shares. If the subscription price is set
SUbstantially below the existing market price, the rights
are certain to have substantial value. But if there is no
general market interest in the securities, the value may be
less than the expected or theoretical value. If this is so,
15
a loss ' re-suI ts for the existing shareholders, which may
adversely affect future financing opportunities available
to the financial manager.
During the period between announcement of the rights
offering and the subscription date, the market price, of
course, may fluctuate almost continually. At any given
time, the relationship between the price of the stock and
the right should tend to reflect the theoretical value.
Otherwise arbitrage would take place, forcing them closer
to their theoretical relationship. However, this may not
always be true in practice. Speculators may obtain a much
greater "play" from the commi tment of a given amount of
funds by trading in the rights rather than in the stock.
Therefore, if speculators are optimistic, expecting the
stock price to rise in the short term, they may bid the
rights up well above their theoretical value. Conversely,
if they expect the price of the stock to fall, they may
short the rights in sufficient quantities to force their
price below theoretical value.
Advantages of "Rights Issues" for Fund Raising
It can direct to existing shareholders, who
constituting a receptive market for additional shares. It
may be possible to reduce the cost of flotation of the new
issues. Whenever the shareholder exercises his rights
completely, the relative voting rights are unaffected. It
can ensure that existing shareholders have opportunities to
maintain their proportionate interest in the company. In
the business custom, the underwriting fee for rights issue
16
is normally 2% ; while that of "direct invitation" of new
shares is 2.5%. Although there is no legal restriction on
the percentage of commission, however, the underwri ter
always follows the rule.
Trading strategies for Shareholders
There are numerous trading strategies for an investor
to handle a rights issue. The courses of actions open to an
investor :
1. holding the stock, doing nothing and let the rights
expire
2. holding the underlying stock and selling the rights
3. holding the stock and exercising his rights in full by
paying the required amount
4. purchasing the nil paid rights from the market & then )
exercise the rights
The actions taken depend on many factors. Amongst the
points for consideration are :
1 . the tax, risk and investment profile of the
shareholder
2. the price of the shares for subscription under the
rights granted, versus the current and anticipated
market price
3. application of the fund: for the organic growth, for
an acquisition or to rescue an ailing balance sheet
CHAPTER II
METHODOLOGY OF ANALYSIS
Introduction and Literature Review
There are various theories predicting the announcement
day effect of the rights offerings. Three types of
categories can be grouped.
Negative price effect - consistent with (1) a downward
sloping demand for firms' shares leading to a permanent
price reduction, (2 ) capi tal structure hypotheses based
upon redistribution of firm value among classes of security
holders, tax effects, and/or leverage-related information
effects, (3) information effects associated with the sale
of equity by informed sellers, both firms and ' investors,
and (4 ) large t'ransact ion costs associated wi th equi ty
issues.
With tax advantages from debt financing, a new equity
issue may reduce a firm's stock price if it reduces the
firm's debt ratio (Modigliani and Miller 1963).
Positive price effect consistent with (1) a
favourable information ~ffect associated with investment,
and (2) a value enhancing reduction in financial leverage
due, for example, to a reduction in the expected costs of
financial distress an/or agency costs.
No price effect consistent with the close
substitutes - efficient markets hypothesis. , Fama (1970)
18
defined efficient markets in terms of a "fair game" where
security price "fully reflect" the information available.
That is, if markets are efficient, sec.uri ties are priced to
provide a normal return for their level of risk. o
Actually, a number of studies have f6cused on primary
issues of seasoned equity [Smith (1977), Logue and Jarrow
(1978), Marsh (1979), Hess and Frost (1982)]. These studies
generally found a small price reduction in the period
surrounding the equi ty issue. Marsh and Hess and Frost
tested and rejected the hypothesis that the price decline
was associated with the size of the issue. These two
studies, however, focused on the issue date rather than the
date that the offering was announced.
Korwar (1983) did target on the announcement day price
effect of primary issues of seasoned equity. He studied the
424 equi ty issues in the US market and found a price
decline of approximately 2.5% on announcement day. This
study did not· investigate the relationship between the size
of the issue and the magnitude of the price reduction since
it viewed equi ty issues from a capi tal structure
perspective.
Accompanied with the studies by Asquith and Mullins
(1986), Kolodny and Suhler (1985), and Mikkelson and Partch
(1986), they all indicated that issues of seaioned equity
are interpreted as bad news by the marketplace, with
significantly negative announcement date effects on equity
prices. This result is consistent with the Myers-Majluf
(1984) "pecking order" theory of capital structure: firms
19
will resort to equity issues only as a last resort.
For the specific stock market like Hong Kong, it is
valuable to employ a comprehensive analysis on its rights
issuances and examine the nature and magni tude of the
impact on the underlying stocks to observe the basic
differences.
Without considering the formats of the rights issues
and the situation of the underlying market, the percentage
,changes in stock prices on the announcement day could be
investigated for the preliminary test.
In Table 6 , thirty-one stocks (having the rights
issuances) are randomly selected from the year 1980 to
1992. The percentage change in stock price is equal to the
difference between the closing share price on the
announcement day with that on the previous day and then
divided by the closing stock price on the previous day of
the event.
'-------------I~ if. 0/ X *- .pp 00 ~ v~ Hi.. ~f
20
Table ' 6 Price Effects of Rights Offerings
Year St ock Forma t % Change (on announcement date)
1992 China Paint Hold. a, c, d -18.0
1991 Evergo Int'l a -6.01
1990
1989
1988
1987
Regal Hotels b
Dickson Concept a, d
Cheuk Nang a, c
Emperor Int'l a, g
Melco Int'l a, c
Standard Lloyds a
Magnificent a, c
Ontrade Int'l a, c
Semi Tech (Global) b, d
Chung Wha Shipbuilding
Asean
Creative Inv.
Yu Hing
F. P. Special
a
a, d
a
a
a
-17.9
-14.5
-4.21
-28.5
+3.92
-13.7
-8.84
-11.6
+1.22
-6.25
-3.51
-8.91
+3.37
+1.21
QPL a -5.26
Tse Sui Luen a, d -1.11
Holian Inv. a, d +0.877
Chinney Inv. a, d, e, f -9.03
Rivera Hold. a, d -17.3
Chevalier (HK) a, d, f -6.84
Applied Electronic a -4.81
William Hunt a -31.82
Burwill Hold a -0.62
1986
1980
Where
Chasia
Dickson ·Concept
Industrial equity
Impala Pacific
Asean Resources
Orient Overseas
a represents b
c
d e f g
21
a, c -17.2
a -0.613
a 15.84
a -0.833
a 3.597
a 1.4598
rights for shares held rights for shares or warrants held rights shares attached with warrants dividends announcement splitting announcement bonus issue announcement reverse-split announcement
In testing the hypothesis HO mean of the percentage change equal to zero
The test statistics is t cal. = _-=.;X=---__ Sn-1/1/fi
= -6.641 1.7872
= -3.7158
(where n : 31 and ttable : i 2.045 for significant level of 0.05)
22
The -test shows the mean of the percentage change is
significantly different from zero and lies in the negative
size. It gives the rough idea that the announcement of
rights offerings reduce stock prices. However,
effect may be buried by the announcement
the price
of profit
attributable to shareholders in the financial year, the
dividend, bonus issue, the market or business environment
for individual stock during the period, etc. Deeper
examination of the incidence should be engaged~
Performing the "Event Study" (Announcement of Rights Issue)
of the HK Stocks
As mentioned before, the ~nnouncement of the rights
issues are always accompanied with the declaration of the
dividends. In some cases, the exrights date coincided with
the ex-dividend date. The variation of the shares' prices
would be the results of the cumulative effects. In order to
eliminate the effects of the dividends and the warrants
offered with the rights and others incid~nts, the
underlying stocks chosen for analysis should satisfy the
criteria
1. the offer should not be an open or placing one
2. the announcement should be a "pure" one without the
declaration of interim dividends, splitting and bonus
etc. at the same time
3. the rights should only be given to the existing
shareholders on a pro rata basis and do not consider
the number of warrants they are holding.
Simultaneously, no free warrants should be attached to
23
the rights.
Scanning from the records for the years between 1980
to 1991, twenty Hong Kong stocks which could fulfil the
caption criteria and characteristics. They are chosen for
the analysis (Exhibit 2).
To test how rapidly the market responds to new
information, the interval between price quotations should
be daily or less.
To estimate a "normal" return, security daily returns
are regressed against the daily returns of HSI in the same
pe.riod :
where rit = realized return for the ith stock in time period t
r HSIt = realized return for index in time period t
eit = error term or residual, for the time period t
a i & b i are regression coefficients
The above relationship between the return for a
particular securi ty and the market index return is the
"market model" or what Sharp (1963) termed the "diagonal
model". This model is based on two assumptions 1)
Individual securi ty returns are dated -to each other only
through a common relationship with some basic underlying
factor, which we call the market index. 2) Each security's
relationship with the market index is linear.
In order to .obtain better estimation of the values of
a. & b. rather than that ground on fictitious assumptions, 1 1
these regression coefficients are calculated from the daily
changes of the stock closing prices and the daily changes
24
of the HSI for a duration of at least 30 trading days
before the announcement date of each rights issue The
values of the coefficients for each stock are tabulated in
Exhibit 2 also.
The normal return for any time period and fo'r any
individual stock, after adjusting for risk and changes in
the market index, is then equal to :
. Normal return = a i + b i r HSIt
The abnormal return ARit can be denoted by the residual
term e it . The excess return is then calculated as the
difference between the actual return to a security and the
return to its control portfolio
The average abnormal return AARt over the time, with
the days around the date of announcement for the n stocks
will be determined. t test will be utilized to test for the
significance. I 17
AARt = h f, ARit
Moreover, the cumulative average abnormal return
(CAAR) is computed by adding the average abnormal returns
AAR over time, with the time periods centred around the
date of the event or the announcement date.
CAAR ' = [ AAR t
t The CAAR provides a picture of the average price
behaviour of securities over time. In general, if a market
is efficient, the CAAR should be close to zero. The curve
of CAAR against the days around the announcement date was
plotted on the Figure 2. For comparison, the assumptions of
5
o
it)
t~ -5 ~ '-'
~
~ . -10 ~
V
-20
25
taking a equal to zero and b equal to one were also
considered (Figure 3). The corresponding computed values of
the AAR and CAAR are shown in the Exhibits 3 and 4.
. -
I
-8 I
-7
Figure 2. CAAR Around the Announcement Day with Calculated a and b values
.--.... .-.... --.----
I I I I I I I I I I I I I I I
-6 -) .... -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Days
____ (J\AR ... t\round the Anno"uncernent Day \vith calculated a &. b
I I
9 10 J
11
"
... I \
10
s -
o
-) -....
-10
Figure 3. CAAR Around the Announcement Day with a = 0 and b = 1
\\ \ \ -_ .. . R... ....- .... .
26
-..... .... --- '.. ..... .- ......• ----- ---. \ •.•..
\
\._--~-...... --.
I I I I I I I I I I I J I I I I I I I I
-8 -7 -6 -5 -4 -3 -2 -1 0 1 t) 3 4 5 6 7 S 9 10 11 J..:
Days
____ C ... ~~R Around the Announcen1ent [)ay \vith ' a = 0 and b =1
27
Analysis of the Result
For the testing of the announcement effect on the
price , teal is computed from the market adjusted abnormal
returns on the day 0 of various stocks and its value is
-1.891.
The empirical resul ts support the hypothesis that
there is a significant drop in the share price associated
wi th the announcement of a rights offering. There is
probably selling pressure on the underlying stocks. The
average investors believe that there is negative
information associated wi th a rights offering cannot be
~ejected.
Figure 2 illustrates the situation where the
unfavourable information is not anticipated and the stock
market appears to be semistrong inefficient. In this case,
the market continually reacts to the public announcement of
the news of rights issues, wi th the resul t that some
investors are able to earn posi tive abnormal returns by
short selling the stock5 on the announcement date. The CAAR
would then continue to depress under the zero in the
subsequent time periods.
Actually, what is the information furnished to the
investors from the magnitude of price change on the
5 Market opinions have been sought on short-selling plans by the Stock Exchange. According to the proposals, only those stocks with a capitalisation of $10 billion and an issued share float of $5 billion in public hands will be eligible to become designated securities. The rules governing the operation of short selling ~pply to those transactions which take place under Sect loon 80 of the Securities Ordinance, by virtue of their being backed by stock borrowing.
28
announcement date of the rights issue ? What is the
implication of the size of the funds raised and its signal
to the shareholders ? If correlation between the aspects of
the rights issues do exist, they will certainly be sensible
materials for the decision making of the investment
strategies.
Correlations Between Rates of Change in Stock Price
During Announcement Period and
the Size of the Proceeds
The Table 7 shows the price effect acting singly on
the announcement day, and Table 8 illustrates the amount
raised, the . number of shares outstanding and the
shareholders' funds in the company before the announcement
of the rights issues.
29
Table 7: Change in Stock Price on the Announcement Day
Stock Name Price effect on
Announcement Day
Nominal (%)
Harriman 1989 0.91
Evergo 199.1 -6.01
Chung Wha 1990 -6.25
Applied Electron. -4.81
QPL Holdings -5.26
Standard Lloyds -13.70
Creative Inv. -8.91
Guangdong Inv. -11.76
F. P. Special +1.21
Yu Hing 3.37
Burwill Hold. -0.62
William Hunt -31.82
Dickson Concepts -0.61
Impala Pacific -0.83
Lambda Tech. 1.02
Wah Sing Toys -6.67
Industrial Equity 15.84
Success Holdings -20.43
Orient Overseas 1.46
Asean Resources 3.60
Average Price Change = standard Deviation of Price Change =
-4.51 % 0.0995
Table 8 Database of the Stocks (amount raised, total shareholders' funds and shares outstanding)
Money Raised
no. of rights shares
($' 000) --l..,(-':"" O-=-:OO-L-l __
Harriman 407,000 Evergo 313,000 Chung Wha 41,600 Applied Elect. 85,320 QPL Hold. 71,400 Standard Lloyds 66,090 Creative Inv. 85,380 Guangdong Inv. 40,280 F. P. Special 28,020 Yu Hing 88,000 Burwill Hold. 30,160 William Hunt 108,900 Dickson Concept 609,230 Impala Pacific 156,400 Lambda Tech. 132,790 Wah Sing Toys 53,450 Industrial Eq. 1,444,140 Success Hold. 106,200 Orient Overseas 120,000 Asean Resources 57,000
148,000 272,315 41,601.1
406,296.9 102,000 115,950 813,312.96 73,234.9 6,639.8
80,000 20,800
217,800 105,952
9,200 107,522,3 84,841.3 -72,206.99
106,200 47,095.2
293,970
no. of outstanding shares before rights issue ( , 000 I
37,000 544,630 208,005.6 270,864.8 306,000 115,950 40,656.5
146,469.6 66,398 10,000
104,000 217,800 132,440 23,000
107,522.3 282,804 144,414
53,100 282,517.3
58,794
Total shareholders' funds before rights issue ($' 000)
485,965 4,357,106
304,256 124,117.3 56,421. 7
124,043 31,540.6
187,863 323,105
18,477 49,750 32,383
270,559 577,499 127,180 188,815.66 441,659 171,643 699,841. 7
1,993
30
The price change on the single day of announcement of
a rights issue shows on Table 7 may not completely
illustrate the effect of the event. There is possibility
that the announcement was disclosed to public at the late
afternoon or even after the trading time of the Stock
Exchange. To minimize thus limitation, the price effect of
each stock was computed from the average daily abnormal
return (starting from day 0 to day 5), and the results are
tabulated in Table 9.
The size of the rights issues can be expressed in term
of two ways : the amount of money r~ised and the magnitude
of the additional rights shares. Hence, they are compared
with the pre-announcement value of firm's equity and its
31
outstanding number of shares to get the size ratios. The
corresponding scatter diagrams for the size of rights issue
against the average daily market adjusted abnormal return
are plotted on Figure 4 and 5.
Table 9 : Average Daily AR vs Size Ratio of Rights ' Issues
. Stock Average daily AR (%) (Based on day 0 to day 5)
Harriman 2.957 Evergo 4.813 Chung Wha -2.719 Applied Elect. -1.44 QPL Hold. -2.045 Standard Lloyds -3.881 Creative Inv. -6.306 Guangdong Inv. -2.955 F. P. Special -0.0612 Yu Hing -1.8788 Burwill Hold. -1.263 William Hunt -5.148 Dickson Concepts -2.568 Impala Pacific 0.1695 Lambda Tech. -0.785 Wah Sing Toys -5.311 Industrial Eq. 0.0301 Success Hold. -4.658 Orient Overseas 2.0178 Asean Resources * -8.324 (base on day 0 to day 3)
Size *ratio of Rights \ssue: A (%) B (%)
400 50 20
150 33
100 200 .
50 10
800 20
100 80 40
100 30 50
200 16.67 500
83.75 7.18
13.67 68.74
126.5 , 53.28 270.7 21.44 8.67
476.3 60.62
336.29 225.2 27.08
104.41 28.31
326.98 61.87 17.15 2860
Where A * = number of rights shares pre-announcement number of shares outstanding
B * proceeds raised ($) = pre-announcement value of firm's equity ($)
AR
AR
I 10 f-
5 f-
I
32
Figure 4. Scatter Diagram
•
Average Daily Market Adjusted A~normal Returp Against the Size Ratio of the Rights Issues (A )
I
I. 0 t- •
( 90 ) I. •
-5 l- •
-10 f-
I
0
5 f- •
I
• (%)0 f- •
la
-5 t- I
-10 ""' I
o
• • • • • • • • • 1 J I
200 400 600
A* (%)
Figure 5. Scatter Diagram
I.
.1
. -::.~ ,'.
Average Daily Market Adjusted Abnormal Retprn Against the Size Ratio of Rights Issues (B)
I I I I
• • • • •
I I
I I I I
100 200 300 400
B* (%) Size of Additional Funds
I -
-
-I
-I
800
I -
-I
-
-I
500
33
Analysis of the Results
The Pearson's product moment correlation coefficient
(r) measures the strength of the linear relationship. The
correlation r between the average daily abnormal return and
the A* is -0.201 which can only explain 4.04% of the
variability in the Daily AR values by a linear relation.
The correlation r between the average daily abnormal return
and the B* is -0.512, which can explain 26.21% of the
variability of the former variable.
Regression for the samples (Table 10) indicates that
the announcement effect (during day 0 to day 5) is
inversely related to the size of the issue (in term of the
planned proceeds of the offered divided by the pre-
announcement value of the firm's equity) and the price
reductions are significantly linear related to the latter
variable at significant level of 0.05.
Table 10 Estimated Coefficients and t-statistics for the Regression
Dep Var: AR N: 20 Multiple R: -0.512 Squared Multiple R: 0.262
Adjusted Squared Multiple R: 0.221 Standard Error of Estimate: 2.819
Variable Constant Size
Coefficient -1.293
Std Error Std Coef Tolerance T p( 2 Tail) 0.685 0.000 -1.888 0.075
--0.003 0.001 -0.512 0.100E+01 -2.527 0.021
Analysis of Variance
Source Sum-of-squares Regression 50.754 Residual 143.058
Df 1
18
Mean-Square 50.754
7.948
F-Ratio 6.386
E 0.021
34
The Price Effect of Rights Issue and the
Total Net Assets of the Company
The total net asset in the issuance company, which is
equivalent to the total shareholders' fund, is the other
important factor that should be tested for. The to~al net
assets consist the share capital, minority interest, share
premium and reserves.
The relationship between the average abnormal return
and the company's net asset are tested and
corresponding scattered diagram is plotted on Figure 6.
10 f-
5 to-
o AR (%)
t-
I
• -5 I- I
• I.
Figure 6. Scatter Diagram
2 I
I
•
Average Abnormal Return Against the Company's Net Asset
I
• 1
I
I
I •
I
I
• I
I
the
I
I -
-
-
--10 I- I 1 LL-I ________________ IL-______________ ~I ________________ ~ ________________ ~
o 200 400 600 800
Company's Net Asset ($'000,000)
35
Analysis of the Results
The results are shown on Table 11. The correlation
coefficient r between average abnormal return and the
company's net asset is +0.62 which can solely explain 38.4%
variation of the former dependent variable. The t 1 is ' 3.348 ca
with n equal to twenty. Hence, the positive linear
relationship is significant existed. The negative effect is
smaller when the company's net asset is greater, and vice
versa.
When the size of rights issue (ratio) and the
company's net asset ' are chosen as the dummy variables in
the multi-regression, the correlation r will increase to
0.747 (accounts to r2 equals to 55.8%).
Table 11 Estimated Coefficients and t-statistics for the , Regression
Dep Var: AR N: 20 Multiple R: 0.747 Squared Multiple R: 0.558
Adjusted Squared Multiple R: 0.506 Standard Error of Estimate: 2.245
Variable Constant Size Net Asset
Source Regression Residual
Coefficient -2.208
Std Error Std Coef Tolerance T p( 2 Tail) 0.609 0.000 -3.626 0.002
-0.002 0.001 -0.423 0.9739974 -2.588 0.019 0.002 ' 0.001 0.551 0.9739974 3.374 0.004
Analysis of Variance
Sum-of-sguares 108.137 85.675
Df 2
17
Mean-Sguare 54.068 5.040
F-Ratio 10.728
E 0.001
The findings are consistent with the empirical results
of Paul Asquith and David W. Mullins (1986) and that of R.
W. White and P. A. Lusztig (1980). The results demonstrate
that the announcement of seasoned equity offerings reduces
36
stock prices significantly (negative excess returns),
The other points will be discussed and summarised in
the chapter of Conclusion.
37
CHAPTER III
CONCLUSION
The result demonstrates that the announcement of
equity offerings reduces stock prices significantly. The
findings are consistent both with the hypothesis that
equity issues are viewed by investors as negative signals
about a firm's current performance and future prospects,
and with the hypothesis that there is a downward sloping
demand for a firm's shares.
Some argue ' that firms should time rights issues to
minimize the attendant adverse stock price effects. Firms
tend to issue rights following a rise in stock price, and
this is when the rights issue price reduction tends to be
small.
From the empirical multi-regression analysis in this
report, two publicly available pieces of information
(1) the size of the equity issues (in the percentage
of the total shareholders' funds) and
(2) the company's net asset in dollar amount disclosed
in previous financial year
are significantly related to the (Average daily AR' and can
explain 55.8% of the percentage variation of the stock
price. For further investigation, other dummy variables may
be included, such as the changes in EPS or the dividend per
share in the previous financial year.
This ' finding is
belief by executives
38
consistent with the strongly held
and investment bankers that large
equity issues depress stock prices. However, this result
does not distinguish between the price-pressure hypothesis
and explanations based on asymmetric information since a
size effect is consistent with both hypotheses.
Generally speaking, investors give cold shoulder on
the total number of the outstanding shares of firms in the
event and the basis of the rights issue (that is the
additional shares raised). They react to the announcement
in the minutes according to the restricted information on
hand, for example, what is the "size of the company (in monetary
definition)", tt its past performance (the total net asset recorded in the recent
years I", and its future prospect.
The finding of the negative market reaction to
external equity financing (rights issues) produces an
interaction among major financial decisions investment
policy, capital structure policy and dividend policy.
On the other hand, there is controversial view about
the buried strategic purpose of the rights iss~ances which
utilize the significant drop in shares prices by the impact
of the rights offering. Some aggressive majority
shareholders would frequently propose to raise substantial
funds by the way of rights offerings within a short period
of time. Once the events stimulate the selling pressure on
the underlying stocks and reduce the share prices
significantly, the majority shareholders would purchase the
stock at low price and then try to privatize the company.
39
The management of Evergo International Holdings Limited is
one of thus hunters. Table 12 actually illustrates the
"trading technique" of Joseph Lau ·and Thomas Lau taking in
Hong Kong market during the years.
Table 12 Rights Issuance of Evergo and its Subsidiaries
Evergo Int. J 1 Holdings
Year Basis Amount Raised (HK$ Million)
August 1986 Rts 3 for 5 124.778 Feb. 1987 Rts 4 for 2 1056.0 Feb. 1991 Rts 1 for 2 313.0
April 1987 Rts 4 for 1 1160.0
Chi:n.a T{n"tert.ai:n:.men"t & Land I:rrves·t:men"t
Oct. Oct.
1986 1988
Sept. 1989
Nov. 1988
Rts 7 for 1 Rts 3 Consolidated shares for 5 Rts 2 for 1
Paul "Y. Holdings
Rts 2 for 1
536.172 864.78
922.44
450.0
Finally, since the announcement of the rights issues
are always accompanied with the declaration of dividends,
profit earnings, splitting, bonus and attached with
warrants etc., additional research is needed to analyse the
cumulative effects onto the stock prices. The corresponding
works will be both rigorous and comprehensive.
E.>e.hibit 1
THIS DOCUMENT IS IMpORTANt AND REQUIRES YOUR IMMEotAT~ AtteNtioN
If you a~e I~ any doubt about ~hi.s document, or if you have sold (other than ex-rights) all ot part of your registered holding of Shares In Olckso,n Concepts LimIted, you should consult your stockbroker, bank manager solicitor professional accouhtant or other professional adviser. ' ,
A copy of this doc~ment, together with copies of the provisional allotment lettet, the form 01 appllc~tion for excess Rights Sha~es and the wnt~en ,consents referred to, in Appendi~ V of this document, has been delivered for registration to the RegIstrar o~ Co.mpanles In Hong Kong as reqUlr~d,?y ,Section 380 of the Companies Ordinance of Hong Kohg. The Registrar of Compantes In Hong Kong takes no responsibility as to the contents of any of these documents.
The Stock, Exchang,e of Hong Kong Limited takes no responsibility fot the contents of this document, l11ake~ nb rep~esentatlon ~s to ,Its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever anslng from or In reliance upon the whole or, any part of the contents of this dodument.
.'
DfCKSON ~
~~~Ij}!1f~'&i~ ~ DICKSON CONCEPTS LIMITED
(Incorporated in Hong Kong With limited liability)
RIGHTS ISSUE of 207,682,464 Shate~ of HK$1.00 @ach
at HK$5.2S p~r ~hate ..-
p~yable ih full 011 acceptahce and
major transactioh
MANAGEFt AND UNbERWFUtl:~
WARDLI:Y CORPo~ATI: f=INANCE LIMitED
; I ;
The latest time for acceptance and payment for the Rights Shares is 4:00 p.m. on Tuesday, 24th September, 1991. The procedure for acceptance is set out on page 6.
It should be noted that the Underwriting Agreement in respect of the rtights Issue contains provisIons entitling th~ Underwriter, Wardley Corporate Finance Limited, to terminate its obligations thereunder on the occurrence of eertaln events, including force majeure, or a material breach of the representations and warranties contained In the Underwriting Agreement, occurring before 5:00 p.m. on the second business day following the la~t day for accepttlilca and payment under the Rights Issue. For this purpose, torce majeure Includes the occurrence, happening, coming Into effect or becoming public knowledge of any event or circumstances (financiar, political, economic, market or otherwise) which in the reasonable opinion of the Underwriter is or will be or Is likely to be materially adverse to the Company and its subsidiaries (taken as a whole) or the issue of the Rights Shares or any change In financial, political, economic or market conditions which In the reasonable opinion of the Underwriter will or is likely ,to prejudicially and materially affect the Rights Issue, or otherwise in the reasonable opinion of the Underwritet make it Inadvisable Ot Inexpedient for the Company as S prudent listed Issuer to proceed with the Rights Issue. If the UnderWriter exercises such rights the Rlghts.~suewill not proceed. f::.s a r~sult of thl~ provision ,there. is,S conse~uenti,a,~ risk In , ~ea~,ing In,the. nil paid rights ,and the Shares of the Com~any, Which h~ve~een d~alt In, onanex-ri~hts ,and l ~x-tln81 d,lvldend ~~sI3 since 30th August, 1991, during the period when the conditions to Which the f:llght~ Issue is subject remain unfulfilled.
~. •. _;',1., . ';
5th septeri1b~r, 1991
. .............
40
41
Exhibit 2
S-t.oc:k lUro..o"UJ.lC.e:J.J.le:trt a. ". CaleulullUll "btweil 1 Di Da;te Ull :.r.w..t ,ol -t:rtW.i.ug
ilu.Ya
Evergo 14/1/91 ":"0.01462 1.488125 30
Chung Wha 28/7/90 0.008544 -0.11937 30
Wah Sing Toys 28/6/90 0.008548 1.263184 30
Standard 8/6/90 0.004776 0.112106 30 Lldyds
Success Hold. 3/1/90 -0.00017 0.018873 30
Harriman 27/1/89 -0.0022 0.125522 30
Creative 21/10/89 0.049565 2.506301 30
Guangdong 10/12/90 -0.00539 1.40853 30
Yu Hing 8/4/89 0.000254 0.223613 30
Applied 29/6/88 0.001532 2.08997 30
QPL 3/5/88 0.000792 1.014346 30
F. P. 24/6/88 0.000997 0.188956 30 Special
Burwill Hold 10/2/87 -0.00185 0.834254 30
William Hunt 31/3/87 -0.01961 0.615886 30
Dickson 15/9/87 0.020535 0.442859 30 Concept
Lambda Tech. 1/10/86 0.015494 0.072906 30
Impala Pac. 15/9/86 0.006953 0.219726 30
Industrial 24/4/86 0.0103.22 0.488625 30 Equity
Orient 11/6/80 -0.00717 0.82607 30 Overseas
Asean Res. 14/10/80 0.025715 1.950418 23
42
Ex
hib
it
3
The
Daily
Abn
ormal
Retur
n fo
r th
e Co
rresp
ondi
ng S
tock
s Ar
ound
the
Ann
ounc
emen
t Da
y (w
ith a
and
b va
lues
from
cal
cula
tlon)
ab
out
30 t
radi
ng d
ays
Abno
rmal
Retur
n in
%
-8 da
y ~
_-6 _
_ -5_
_-4 _
_
-3 _
_ -_2 _
_ -1 __
0_
J:
L ~
-.il _
_ i-_4
Harri
man
0.044
3 1.0
75
-0.6
32
1.148
-1
.63
3.025
0.8
86
0.783
4 10
.78
1.882
1.0
19
Everg
o -3
.416
-2
'.000
9 -2
.104
-2.
125
2.303
1.0
95
-1.5
7 -0
.201
-3
.54
9.66
2.296
-2
.62
6.00
Chun
g Wh
a Sh
ip.
5.945
-0
.024
-2.
71 -
2.43
4 1.
882
-7.3
69
-4.6
9 5.1
91
-1.0
38 -
1.05
8 Ap
p lie
d El
ect.
-2.0
56
-4.0
79
2.569
0.2
82
-2.7
7 0.2
07
5.229
2.0
38
-3.9
21 1
.041
-1.1
82
-0.3
85 0
.2908
QP
L Ho
lding
s -0
.045
0.9
33
-0.5
39
0.780
2 0.3
397
-0.3
17 -
0.98
0.4
073
-6.8
33 0
.1262
0.16
4 -2
.837
-2.
743
Stan
dard
Lloy
'ds
-1.8
07
-2.0
15
-4.8
61
2.368
-0
.456
-3
.356
6.82
8 -0
.382
-14
;21
-3.8
23 -
3.69
4 1.1
95
-0.5
13
Crea
tive
Inv.
7.995
6.3
226
-4.9
66 -
2.97
4 -4
.507
-9.
5656
.358
-1
.328
-16
.48
-13.
63 -
7.86
7 3.2
55
0.732
6 Gu
angd
ong
0.918
2 1.1
675
1.199
7 -2
.439
0.9
38 2
.556
-0.7
14
3.706
-1
2.64
-2.
46
0.800
2 -4
.28
-2.8
6 F.
P. Sp
ecial
"
0.368
6 -0
.159
1.14
5 -1
.172
-0.
508
-1.2
25 -
0.26
6 Yu
Hing
-0
.118
0.0
966
-0.7
21 -
1.84
6 0.1
068
-1.1
72 -
0.20
1 -0
.089
3.36
5 -3
.864
-0
.843
-1
.301
-2.
35
Burw
ill H
old.
4.6{2
6 7.3
266
4.140
4 -4
.665
-2
.025
-0.
306
0.768
8 -1
.066
0.14
25 -
1.19
6 -4
.654
-1
.345
-0.
593
Willi
am H
unt
-0.4
43
-2.3
69 0
.7911
3.88
81
0.263
8 3.3
165
-29.
45 -
30.0
1 24
.09
2.312
Di
ckso
n Co
ncep
t -1
1.283
1.4
557
0.561
-0
.283
-1
.76
0.082
1 -3
.377
-4
.901
-2.
119
-5.3
48
0.818
-2.
889
-2.3
86
. Imp
ala P
acifi
c 2.4
962
-1.01
39 -
1.23
2 -0
.715
-1
.316
-3
.343
-0.
265
-6.5
78 0
.6954
-3.
962
-1.2
61
-3.8
94 -
0.62
7 La
mbda
Tech
. 1.8
069
-0.0
24
9.535
2.2
393
-4.3
4 -2
.584
-8.
387
-0.5
33 -
0.60
6 1.3
766
0.361
-2.
341
-0.8
51
Wah
Sing
Toy
s 3.8
788
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8
BIBLIOGRAPHY
Books
Burton A. Kolb, and Richard F. DeMong. Principal of Financial Management. 2nd ed. Business Publication, 1988.
Charles O. Kroncke, Erwin Esser Nemmers, and Alan E. Grunewald. Managerial Finance : Essentials. 2nd Ed.
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Companies Handbook 1987. Vol. 1 & 2. The Stock Exchange of Hong Kong Limited, 1987.
Franks Broyles. Corporate Finance. Kent Publication Co., 1985.
Listing Agreement. Section 20. The Stock Exchange of Hong Kong Limited, 1991.
Richard A. Brealey, and Steward C. Myers. Principles of Corporate Finance. 3rd ed. McGraw-Hill Book Co., 1988.
Rules Governing the Listing of Securities. Appendix A7 a-g. The Stock Exchange of Hong Kong Limited, 1991.
Russell J. Fuller, and James L. Farrell. Modern Investments and Security Analysis. McGraw-Hill Book qo., 1987.
Weston, and John Frederick. Managerial Finance. 5th ed. Dryden Press, 1975.
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Kolodny, R., and D. Suhler. "Changes in Capital Structure, New Equity Issues, and Scale Effects." Journal of Financial Research, Summer (1985), pp. 127-136.
Logue, D. E. and R. A. Jarrow. "Negotiation Versus Competitive Bidding in the Sale of Securities by Public utilities." Financial Management, Vol. 7 (1978), pp. 31-39.
45
Marsh, P.' R. "Equity Rights Issues and the Efficiency of the U. K. Stick Market." Journal of Finance, Vol. 34 (1979), pp. 839-862.
Mikkelson, W. and M. Partch. "Valuation Effects of Security Offerings and the Issuance Process." Journal of Financial Economics, Jan.-Feb. (1986), pp. 31-60.
Myers, Stewart C. and Nicholas S. Majluf. "Corporat~ Financing and Investment Decisions when Firms have Information that Investors do not have." Journal of Financial Economics, Vol. 13 (1984), pp. 187-222.
Nelson, J. Russell. "Price Effects in Rights Offerings." The Journal of Finance, Vol. 20 (1965), pp. 647-650.
Scholes, M. S. "The Market for Securities: Substitution vs. Price Pressure and the Effects of Information on Share Prices." Journal of Business, Vol. 45 (1972), pp . 1 79- 211 .
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