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John Moffat.
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tbm13
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I read the following somewhere: “The success of rights issue will depend on the willingness and ability of the director-shareholders to subscribe.”
Why is this? Is this because of asymmetry of information (directors know more than outside shareholders) and signaling or some other reasons?
(The context was that director-shareholders might not have the funds to take part of the rights issue and that would cast doubt on other shareholders taking up the right issue.)
John Moffat
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Whether or not the directors know more, if they are not subscribing for any reason then other shareholders may assume that there is a problem that they do not know about and therefore they may be less willing to subscribe also.
tbm13
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