THE LONG-TERM PERFORMANCE OF SOUTH

The objective of this research was to investigate the long-term abnormal priceperformance of South African firms following rights issues over the period 1991-2000. This research makes a number of contributions relative to prior research.South Africa, unlike most other national markets, favours rights issues over cashoffers. Since most of the research has been conducted in developed markets,South Africa, as an emerging economy, provides a valuable opportunity todetermine whether the underperformance of seasoned equity offers is confinedonly to first world economies.Results from the study showed that over a three to five year period, rights issuingfirms underperformed their equally-weighted benchmarks. The underperformanceappeared to be driven primarily by small issuers. These findings are consistent withthe South African study by Affleck-Graves & Page (1996). The research also foundthat South African managers do not take advantage of overvaluation in theseasoned equity markets.