The impact of rights issues announcements on share price performance in South Africa

Van Der Merwe, Hein

The impact of rights issues announcements on share price performance in South Africa

Master Thesis

2016

Publisher

University of Cape Town

Department

Department of Finance and Tax

Faculty

Faculty of Commerce

Abstract

This study investigates the effect that announcements of rights issues have on abnormal share price returns on the JSE over the period January 2009 to December 2014. This study will focus specifically on the equity element of the capital structure and the issuing of new equity in the form of rights issues. There have been a few studies done in this regard in the South African context but the prior papers have been conducted over significantly different time periods and data samples and there is therefore merit in combining all four approaches into a single study focused on one consistent data sample. Secondly, this study also investigates the impact the motivation for the rights issue as provided by the issuer, has on the share price returns of the issuers. Thirdly, this study investigates the effect of the "financial health" of the rights issuer, as measured in terms of the Altman Z-score, has on the abnormal returns of the share prices of the issuers. The final area of investigation is to test the ability of rights issuers on the JSE to time the market when performing rights issues.

Keywords

Financial and Risk Management

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