Cash Holding and Operating Performance of Rights Issue Companies
Weng Jun-yi · Policy-making Reference · 2002
In this paper the listing companies' cash holding and operating performance around rights issue are analyzed taking the companies that issued rights in 1999 as the sample. We conclude that the cash of rights issue companies were money and short-term security in the year of rights issue and invested in next year but 26 percent of the sample changed their investment. The operating performance decreased sharply in the year of rights issue and kept stable in the year of investment, but decreased in the next year of investment again. Above all in the cash-rich companies the performance got worse, the cash kept more. We think the management inefficiently used the cash of rights issue, which took an accord with the agency cost of free cash flow hypothesis.