What Information Implied in the Equity Offering Mechanism with Market Timing Considerations?
Purpose: This research looks at how the choice of share offering mechanism between public offering, rights issue, and private placement implies certain information about the condition of the issuing company. Design/Methodology/Approach: Issuance of shares through market timing considerations clarifies essential information. Not much available literature focuses on SEO mechanisms that have an adverse market reaction. The gap in this study is about the relationship between the motivations behind selecting the share issuance mechanism. Findings: One of the results of this study found that companies that offer a large number of shares when overvalued choose to use the rights issue mechanism because they print higher abnormal returns than other mechanisms. These findings indicate that the bidding mechanism and issuance motivation reflect favourable information about the company's prospects from the offer. The allocation of profits from the transaction reflects future corporate policy information. Further empirical evidence states that companies that choose private placements with market timing considerations face a more severe problem of asymmetric information than companies that choose other mechanisms. Practical Implications: Thus, investors can obtain information about the company's conditions, plans and prospects before investing. This study uses data specific to information asymmetry and market timing on stock offering transactions in Indonesia to represent emerging markets for the 2000-2020 period.