John Capstaff

Long-Term Performance Following Rights Issues and Open Offers in the UK

This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used.

Long Term Performance and Choice of SEO Method by UK Firms

The long term performance of firms making seasoned equity offerings (SEOs) in the UK, in an era of discretion over the choice of issue method, is shown to differ according to the chosen method across a number of different models of expected returns. The combination of prior and post�?SEO performance suggests that rights offering firms are less likely to time offers to exploit overvaluation than firms using placings. When judged on a long term basis rights offering firms are not of lesser quality than firms that choose other offering methods.

Comment on ‘earnings management around UK open offers’

This note discusses the result of Iqbal, A., S. Espenlaub, and N. Strong. 2008. Earnings management around UK open offers. European Journal of Finance, this issue, regarding long-run abnormal returns following open offers and announcement abnormal returns, compared with differing results in two previous studies based on similar samples. A survivorship bias explains some of the differences in the reported long-run abnormal returns. The difference in the announcement abnormal returns could be due to use of different data sources.

International Cash Management and Hedging: A Comparison of UK and French Companies

Several papers have investigated the use of foreign exchange (FX) derivatives but evidence on the use of international cash management meth ods to hedge FX is scarce. This paper contributes to the existing evidence by considering the use of international cash management systems to hedge foreign exchange (FX) risks using a sample of French and UK companies. We find that matching, netting and pricing policies are the most commonly used techniques in both the UK and French samples al though there is evidence of greater use of all cash management techniques in the UK. We also consider whether the theoretical explanations of hedging determine the use of cash management techniques for FX hedging, and if there are differences between the UK and French samples. We find support for the theoretical prediction that FX hedgers have higher levels of financial distress, and that these firms tend to be larger, more international and less liquid. We find little support for the under investment theory. The extent of internationalisation appears to play no role in the decision of French firms to use cash management techniques to manage FX risk, and the use of all cash management techniques were lower than in UK firms. These latter findings may be explained by the reduction in FX risk facing French firms following the introduction of the euro.