WHY UNDERWRITE RIGHTS OFFERINGS - SOME NEW EVIDENCE

We examine rights issues on the Oslo Stock Exchange, where seasoned pu blic offerings now take place almost exclusively through use of the re latively expensive standby underwriting method rather than unsinsured rights. We show that the propensity to use standby underwriting increa ses as expected shareholder takeup decreases, that the market reaction to uninsured rights offers is significantly positive, and that standb ys elicit the least favorable market reaction to the public issue anno uncement. These and other cross-sectional results are consistent with the asymmetric information framework of Eckbo and Masulis (1992) and h elp resolve the longstanding rights offer paradox.