Issuance of units in rights offerings, agency cost and signaling theory

Abstract

We examine the issuance choice of unit offerings made by Malaysian publicly listed firms. Our results show that smaller and riskier firms with less earnings, lower ownership concentration and lower liquidity tend to choose unit offerings than equity rights offerings. We also find that the market reacts more negatively to the unit offerings during the subscription period indicating that the market prefers equity rights offerings rather than units to raise capital in Malaysia.