Securities regulation reform and the decline of rights offerings

This paper develops the hypothesis that the decline in the use of rights offerings is due to reductions in issue costs brought about by changes in securities regulation. The hypothesis is tested in two jurisdictions: Canada and the United States. Time series analysis is used to determine if the decreased use of rights offerings in the 1970-1985 period is associated with regulatory changes designed to ease stock issues, such as Mort form registration and shelf registration in the U.S. and the Prompt Offer Qualification (POP) system in Canada. The findings are consistent with a significant decrease in rights usage concurrent with the earliest reform in each country.