Agency conflicts in closed-end funds: The case of rights offerings

Ajay Khorana, Sunil Wahal, Marc Zenner

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


We study 120 rights offerings by closed-end funds from 1988-1998. On average, rights offerings are announced when funds trade at a premium. This premium tums into a discount over the course of the offering. The premium decline is more severe when increases in the investment advisor's compensation are larger and when the fund uses affiliated broker-dealers to solicit subscriptions to the offer. A clinical analysis shows that rights offerings allow investment advisors to sidestep fee rebates and increase pecuniary benefits to affiliated entities. Overall, our results suggest the presence of significant conflicts of interest in rights offerings by closed-end funds.

Original languageEnglish (US)
Pages (from-to)177-200
Number of pages24
JournalJournal of Financial and Quantitative Analysis
Issue number2
StatePublished - 2002
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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