The choice of SEO method in Korea: Rights vs. public offers

Using South Korean data for 2000–2015, we find that firms with less information asymmetry and larger issue size are more likely to choose rights issues over public offerings and that control considerations also affect the flotation choice. We also find that rights offerings are met with more negative announcement returns than public offerings, and that stockholders of rights issuing firms seem to be compensated for the initial adverse market reaction by large issue-day returns. We contribute to the literature with an intra-market analysis of the SEO method choice, which cannot be done in markets with a dominant flotation type. •Firms with less information asymmetry are more likely to choose rights over public offers in Korea.•Firms with larger controlling shareholders’ ownership prefer the rights issue method.•Controlling shareholders who exercise the rights earn large issue-day returns on newly issued shares.