THE EFFECTS OF EQUITY ISSUES ON OWNERSHIP STRUCTURE AND STOCK LIQUIDITY - A COMPARISON OF RIGHTS AND PUBLIC OFFERINGS

[ find that proportionate bid-ask spreads increase after rights offeri ngs of common stock, but decrease after public underwritten offerings. These changes are correlated with changes in the issuing firm's owner ship structure. Public offerings cause greater dispersion in share own ership while rights offerings lead to more concentrated ownership. I a rgue that increased spreads represent a significant cost to issuing fi rms' shareholders, making rights offerings costlier than public underw ritten offerings for actively traded firms.