300 B.E. Eckbo et al.
Ta b l e 1 0
(Continued)Total issues Industrial issues Utility issues
Total FC Stand Right Total FC Stand Right Total FC Stand Right1980 162 157 2 3 87 86 0 1 75 71 2 2
1981 152 149 1 2 64 63 0 1 88 86 1 1
1963–
1981
1 , 249 1 , 057 134 57 473 401 43 29 776 656 92 281982–
2003
8 , 708 8 , 375 333 b –8, 241 7 , 912 329 b – 467 463 4 baThe information is fromStevenson (1957)(1935–1955),Eckbo and Masulis (1992)(1963–1981), and SDC
(1982–2003).Stevenson (1957)lists common stock issues with proceeds over $1 million appearing in Sulli-
van and Cromwell Issuer Summaries 1933–1950 and in The Commercial and Financial Chronicle 1950–1955.
Eckbo and Masulis (1992)base their sample on the Wall Street Journal Index, the Investment Dealer’s Digest,
and Moody’s Industrials and Utilities Manuals. Their sample excludes simultaneous offers of debt/preferred
stock/warrants, combination primary/secondary stock offerings, cancelled or postponed offers, and non-U.S.
issues. The SDC sample shown for the period 1982–2003 includes issues on exchanges other than NYSE and
AMEX.
bThe SDC does not provide sufficient information to separate uninsured rights offerings from rights with
standby underwriting. Thus, all rights are reported under the standby category in this table.
to standbys over the past two decades. A similar time trend is evident in the study of
French SEOs byGajewski and Ginglinger (2002).^23 Overall, as concluded byEckbo
and Masulis (1995)andArmitage (1998)as well, there appears to be an international
trend away from rights. This trend coincides with substantial growth in listed firms’
total equity size.
As discussed in Section3 above, the uninsured rights method has by far the lowest
direct costs. Thus, it appears that issuers in the U.S. and increasingly elsewhere are
selecting the most expensive equity flotation method. Therein lies the rights offer para-
dox. Resolution of the paradox requires identifying indirect costs of rights that are of
sufficient economic magnitude to make the total (direct and indirect) costs of firm com-
mitment offerings the lowest for nearly all large, publicly traded industrial issuers in the
U.S. We identified some of these indirect costs in Section3. Eckbo and Masulis (1992)
argue that a potentially large indirect cost emanates from adverse selection in the rights
issue market. We discuss why information asymmetries may drive issuers away from
the rights method next.
(^23) Cronqvist and Nilsson (2005)report that uninsured rights are more frequent than uninsured rights over
their sample period but do not show the time trend.