Date of Award

Summer 1999

Document Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration-Finance

Committee Director

John Doukas

Committee Member

Mohammad Najand

Committee Member

Edward Markowski


Raising capital in foreign capital markets is common in today's business environment. Investors are aware of the advantages of a globally diversified portfolio and seek overseas investments. The Securities & Exchange Commission (SEC) adopted Regulation S in the United States to clarify the extra-territorial application of the registration provisions of the 1933 Securities Act. The regulation allows companies listed on U.S. stock exchanges to expedite issuance of securities offshore by avoiding the lengthy registration process if the securities are intended to “rest abroad.” Characteristics of equity securities issued under Regulation S from November 18, 1996, the first date that disclosure is required, through November 17, 1997 are identified and summarized.

The purpose of this paper is to investigate the nature and extent of the application of Regulation S and its impact on the wealth of stockholders. There is a paucity of research on international issuance of securities and virtually no published works on Regulation S. This study is a timely and important contribution to understanding the dynamics of securities regulations on capital market participants as globalization proceeds.

The financial soundness of issuing companies is quantified using Altman's Z and the effects of the issuance on stockholder returns is determined using event study methodology. The average Regulation S issue discount is compared to other restricted issues. Finally, the study includes a regression analysis on the abnormal returns to identify issue and firm characteristics' influence on the market reaction.

The data indicates that Regulation S has been used extensively, including use by financially distressed companies. Larger discounts than would be warranted with the forty day restriction period and negative abnormal returns around the end of the restricted trading period provide evidence that Regulation S buyers are short-term investors taking quick profits on issues only available to non-U.S. persons. Additional findings indicate that the use of Regulation S has a negative impact on the wealth of existing shareholders. Therefore, additional research is appropriate and continued monitoring by the SEC is warranted to protect U.S. capital markets.