| dc.description.abstract | This paper examines the effects of rights issues on the stock returns of companies listed at the Nairobi stock exchange. In the NSE less than twenty firms have issued rights since its inception back in 1954, in the recent days firms started to embrace issuance of rights to the shareholders as an alternative method of raising additional capital from internal sources, This process is made attractive by discounting the price in which the rights are offered as compared to the market price.
The study is split into five parts. Chapter one provides the background information and theoretical framework of the study. Chapter two exam ines prior researched done and their reported findings, chapter three outline the research methodology. Chapter four provides the data analysis, findings and their interpretations. Chapter five contains the conclusion, limitation and suggestion for further research. The event study methodology as described by Brown and Warner (1985) was used in this study. Market model which is a statistical model that relates the returns of any given security to the return of the market rortfolio was adopted to measure and analyse the abnormal returns.
The abnormal returns are assumed to reflect the stock market's reaction to the announcement of rights issues (MacKin lay, 1997) The finding of the study shows negative abnormal returns prior to announcement of rights, positive abnormal returns during the announcement and negative results thereafter. The findings are consistent with other international studies, for example; Marsh (1979), Scholes (1972), Nelson: (1965), Smith (1977), Eckbo and Masulis (1992) | en_US |
