Market Timing and Asymmetric Information: How do Rights Issues and Private Placements Attract Investors to Overvalued Stocks?

Manuscript type: Research paper Research aims: This study examines the background of selecting the equity offering mechanism between rights issues and private placements when facing asymmetric information and overvalued prices. Design/Methodology/Approach: This research employs the concept of information asymmetry and focuses on analysing market timing data about stock offering transactions in Indonesia from 2000 to 2020. This study uses regression analysis to examine the correlation between information asymmetry and trade volume. Abnormal trade volume before various offerings is subjected to regression analysis using generally used proxies for information asymmetry. Research findings: The conclusions of our research indicate that companies that issue more shares than the overpriced stock tend to exhibit a more excellent abnormal return value in the context of rights issues. The sales volume indicates the company's prospects derived from private information obtained during the offering.