318 B.E. Eckbo et al.
Chaplinsky and Haushalter (2003), Krishnamurthy et al. (2005), andBarclay, Holder-
ness, and Sheehan (2005).^36 Over the period 1979–2000, the sample-weighted average
market reaction to private placements is a significantly positiveARpp= 2 .45%.
A third important finding is that selling SEOs via the rights method appears to affect
the market reaction to the issue announcement, relative to that of both firm commit-
ments and private placements. This impact was first demonstrated byEckbo and Masulis
(1992)who examine both uninsured rights and standbys (in addition to firm commit-
ments), and is evident also in studies examining standbys only, such asHansen (1988),
Singh (1997)andHeron and Lie (2004). As shown in panels (c) and (d) ofTable 13,
uninsured rights are met with a neutral market reaction—ARur = 0 .59%—whereas
standbys elicit a significantly negative market reaction on average. The market reaction
to standbys is smaller than the size of the negative market reaction to firm commitment
SEOs. Over the period 1963–1998, the sample-weighted average abnormal return to
standby announcements is a statistically significantARsr≈− 1 .33%.
Fourth,Bhagat, Marr, and Thompson (1985), Moore, Peterson, and Peterson (1986),
andDenis (1991)report that early users of the shelf-registration method for offering
shares (under SEC Rule 415) experienced a significantly negative market reaction of
about−1%. As discussed above (Table 3), the number of shelf-registered SEOs peaked
in 1982 and 1983, almost disappeared in the period 1984–1991, and then picked up
again, with a relatively large number occurring over the period 1997–2003. The an-
nouncement effect of this later period is reflected in the results reported byHeron
and Lie (2004), Bethel and Krigman (2004), andAutore, Kumar, and Shome (2004).
These more recent studies confirm the basic conclusion from the early sample period:
despite the greater timing discretion afforded shelf-registered issuers, the average mar-
ket reaction is no more negative for shelf issues than for non-shelf firm commitment
offerings. Over the period 1982–2003, the sample-weighted average market reaction
to the announcements of shelf-registered SEOs is small, but statistically significant:
ARsh=− 0 .66%.
4.4.2. Market reaction to SEOs internationally
At the time of the survey ofEckbo and Masulis (1995)there were relatively few studies
reporting the market reaction to security offerings internationally. With the exception
of Japan (Table 11), rights issues (uninsured or standbys) are still the norm in smaller
equity markets.Table 14summarize the findings of international studies of SEOs where
the flotation methods is reported to be either uninsured rights, standbys, private place-
ments, firm commitments or a foreign offering using either American (ADR) or global
(GDR) drawing rights. Note thatTable 14is restricted to studies that show results
for each flotation method separately, eliminating, e.g., studies that pool uninsured and
(^36) Chaplinsky and Haushalter (2003)report that on average announcement returns are positive for traditional
PIPE issuers and negative for structured PIPE issuers.Brophy, Sialm, and Ouimet (2005)also report positive
announcement effect for PIPE issuers.