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Title: Private placements of equity and firm value : value enhancing or value destroying?
Authors: Kang, Jun-Koo
Park, James L.
Keywords: Business::Finance
Issue Date: 2021
Source: Kang, J. & Park, J. L. (2021). Private placements of equity and firm value : value enhancing or value destroying?. Journal of Financial and Quantitative Analysis, 56(6), 2072-2102.
Journal: Journal of Financial and Quantitative Analysis
Abstract: This paper reassesses two conflicting hypotheses on the valuation impacts of private placements of equity (PPEs), the monitoring/certification hypothesis and the managerial entrenchment hypothesis, by focusing on the shareholder approval, active buyer, and premium pricing features of PPEs. We find that PPEs with these features have significant positive announcement returns and insignificant mean long-run returns, while the corresponding announcement and long-run returns for PPEs without such features are significantly negative. Firms with value-enhancing PPE features are better governed and use proceeds more efficiently. Thus, the heterogeneous nature of PPEs helps reconcile the puzzling return patterns and conflicting hypotheses regarding PPEs.
ISSN: 0022-1090
DOI: 10.1017/S0022109020000599
Rights: © 2020 The Author(s). All rights reserved. This paper was published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington in Journal of Financial and Quantitative Analysis and is made available with permission of The Author(s).
Fulltext Permission: embargo_20221007
Fulltext Availability: With Fulltext
Appears in Collections:NBS Journal Articles

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