Wealth Impact of Unit Rights Offerings to Debt Holders: Evidence from Australia

We examine the debt holders' wealth effect of Australian firms and the factors that determine firms' decision to issue unit rights. The sample consists of 638 offerings observations spanning from year 2000 to 2014. Probability of default has been used as the proxy for debt holders wealth....

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Bibliographic Details
Published in:Australasian accounting, business & finance journal business & finance journal, 2023-01, Vol.17 (4), p.128-148
Main Authors: Mohd Roslen, Siti Nurhidayah, Fan Fah, Cheng, Abdul Rahim, Norhuda
Format: Article
Language:English
Subjects:
asx
australian stock exchenge
Compensation plans
Debt financing
debt holders' wealth
Default
Dividend policy
equiety warrants
Equity financing
Financial leverage
Hypotheses
Initial public offerings
Investments
probability of default
Research methodology
Stock exchanges
Stock prices
Stockholders
unit rights
Warrants
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Summary:We examine the debt holders' wealth effect of Australian firms and the factors that determine firms' decision to issue unit rights. The sample consists of 638 offerings observations spanning from year 2000 to 2014. Probability of default has been used as the proxy for debt holders wealth. We also use probit model to gauge determinants of firms' choice in issuing unit rights. As the robustness test, logit model was also presented. Aligned with Sequential Financing Hypothesis by Schultz (1993) and Signaling Hypothesis as in Chemmanur and Fulghieri (1997), we find that firms with small size, low issuance proceeds, high risk, low managerial ownership and positive growth prospect tend to issue unit rights. We also obtain findings that support to Leverage Risk Reduction Hypothesis which suggest that debt holders' return is favorably affected by lower financial leverage.
ISSN:1834-2019
1834-2000
1834-2019
DOI:10.14453/aabfj.v17i4.08