The ex-date impact of rights offerings. The evidence from firms listed on the Tokyo stock exchange

This paper examines the behavior of stock price and trading volume around the ex-dates of rights offerings by firms listed on the Tokyo Stock Exchange. Based on a sample of 248 rights offerings over the time period from 1975 to 1989, we document a significant abnormal stock return of 7.10 percent on the ex-date of an offering. We also find significant increases in trading activity on the ex-date, and the five days leading up to the ex-date, with these increases being related to the ex-date abnormal return. In addition, our investigation reveals an increase in stock volatility after the ex-date, with the median value of this increase being 18 percent. Our results also indicate that a part of this volatility increase can be explained by changes in bid-ask spreads around the ex-date.