Journal of Applied Finance & Banking

The Effects of Rights-Offering Announcements on Market Reaction in Saudi Arabia

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• Abstract

   

  This study investigates the impact of rights issue announcements on the market reaction in Saudi Arabia when the rationale behind the issuance is an investment opportunity or debt payment. The event study was applied using market and capital asset pricing models (MM and CAPM) to a sample of 65 Saudi-listed companies that made rights issue announcements between January 1, 2013, and December 31, 2023. The findings suggest that a firm's rights issue announcement negatively impacts the market reaction when the rationale is debt payment. The price during the first trading date was notably lower than that during the eligible date. Finally, rights-offering activities occurred during the COVID-19 pandemic to help firms meet their obligations.

   

  JEL classification numbers: G12, G14, G40.

  Keywords: Right Issue, Investment Opportunity, Debt Payment, CAPM.