Vol. 3, Issue 2 (2018)
A study on the effect of rights issue announcement on companies listed in the national stock exchange
Author(s): Seenu Babu
Abstract: The study is undertaken to determine whether a rights issue announcement has an effect on the share prices of the companies listed at the National Stock. Rights issue is a way for companies to raise capital. Capital is raised when investors pay for the new shares that are being issued. Companies can use the raised capital to acquire or upgrade assets like equipments, buildings and industrial properties, make a take over, repay debts or save themselves from bankruptcies. Of course, a company can raise capital by other ways, such as borrowing from banks or issuing bonds. Rights issue will also cause significant changes to the company’s cash flow. However, one must also understand that capital raised through rights issue can further strengthen the company’s balance sheet and allow it to pursue strategic opportunities in core markets. Moreover, most the companies preferred rights issues to encourage the investor’s in order to purchase their stocks which are available at cheaper price. The data has been taken from secondary sources for the past five years of right issue from 2013 to 2017.