New insights of seasoned equity offerings in Malaysia

Submission note: A thesis submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy to the La Trobe Business School, College of Arts, Social Sciences and Commerce, La Trobe University, Bundoora.

This dissertation consists of three papers on Malaysian seasoned equity offerings (SEOs) during the period 2002-2012. Using 129 rights offerings which consist of 85 units and 44 equity offerings, Paper 1 reports that the smaller and riskier firms with less earnings, less ownership concentration, less liquidity, smaller Bumiputera ownership and lower audit quality tend to choose units rather than equity via rights offerings. A negative price reaction is found for rights offerings around the announcement and subscription period. Paper 1 highlights the finding that firms with higher issue price discount have larger shareholder take-up and unit offerings have lower shareholder take-up. Paper 2 demonstrates a positive price reaction for the announcement of 149 private placements around announcement and price setting dates. Using the standard event study abnormal returns, it is found that the price reaction is more favourable for established and profitable firms, smaller relative size, smaller audit fee, lower leverage, less risk and smaller run-up around the price setting date. However, this study does not find any significant relationship between key financial characteristics and announcement period reaction. Additionally, this study shows that the discount-adjusted abnormal return is more favourable to established firms and less favourable for firms with higher relative size, higher audit fee, higher leverage, higher risk and larger run-up over the price setting period. Additionally, this study reports that established firms with higher market value, lower ownership and higher Bumiputera ownership experience favourable discount-adjusted abnormal returns around the announcement period, which is consistent with the information and monitoring hypothesis. Finally, employing the cross-sectional modified-Jones (1991) model developed by Dechow, Sloan and Sweeney (1995), Paper 3 shows that only unit offerings manage earnings prior to the SEO announcements. The study documents that equity via rights offerings and private placements do not manage earnings around the SEOs.