Long-run Performance Following Private Placements of Equity

We find that Singapore listed firms which have conducted private placements subsequently experience long-run stock underperformance. The long-run underperformance is more severe for small firms and firms with a higher book-to-market ratio. This suggests that small firms and firms with poorer growth prospects are more likely to time the issue when the stock is temporarily overvalued. Further more, we find a positive relation between the long-run stock performance and the change in ownership concentration of the issuing firms, which is consistent with the alignment-of-interests hypothesis. We do not find evidence supporting the earnings-management hypothesis.

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Long-Run Performance Following Private Placements of Equity

CFA Digest ◽

10.2469/dig.v33.n2.1296 ◽

2003 ◽

Vol 33 (2) ◽

pp. 95-96

Author(s):

Stephen M. Horan

Keyword(s):

Long Run ◽

Private Placements

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Private Placements of Equity and Firm Value: Value Enhancing or Value Destroying?

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109020000599 ◽

2020 ◽

pp. 1-31

Author(s):

Jun-Koo Kang ◽

James L. Park

Keyword(s):

Firm Value ◽

Managerial Entrenchment ◽

Long Run ◽

Announcement Returns ◽

Heterogeneous Nature ◽

Private Placements

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.

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DIVERGENCE OF OPINION AND LONG‐RUN PERFORMANCE OF PRIVATE PLACEMENTS: EVIDENCE FROM THE AUCTION MARKET

The Journal of Financial Research ◽

10.1111/jfir.12170 ◽

2019 ◽

Vol 42 (2) ◽

pp. 271-302

Author(s):

Jianlei Han ◽

Zheyao Pan ◽

Guangli Zhang

Keyword(s):

Auction Market ◽

Long Run ◽

Divergence Of Opinion ◽

Private Placements

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Long-Run Performance following Private Placements of Equity

The Journal of Finance ◽

10.1111/1540-6261.00507 ◽

2002 ◽

Vol 57 (6) ◽

pp. 2595-2617 ◽

Cited By ~ 220

Author(s):

Michael Hertzel ◽

Michael Lemmon ◽

James S. Linck ◽

Lynn Rees

Keyword(s):

Long Run ◽

Private Placements

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Investor Types and Company Performance through Private Placements Basing on State-Owned and -Controlled Listed Companies

International Journal of Business and Management ◽

10.5539/ijbm.v14n11p250 ◽

2019 ◽

Vol 14 (11) ◽

pp. 250

Author(s):

Li Jiaojiao ◽

Qu Zenglong

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Listed Company ◽

Listed Companies ◽

The State ◽

Announcement Effect ◽

Short Term ◽

Private Placement ◽

Long Run ◽

Private Placements

Theoretical and empirical analyses of listed companies owned and controlled by the state making private placement transactions during 2006 and 2013 were carried out to measure the short-term announcement effect of strategic and financial investors’ subscription for new shares in listed companies owned and controlled by the state on corporate governance and long-run performance of these listed companies. It was found that private placements had a positive influence on the performance of a state-owned and -controlled listed company as they brought new institutional investors to the company; strategic investors who subscribed for new shares in a state-owned and -controlled listed company have appeared to cause an announcement effect greater than financial investors; state-owned and -controlled listed companies that attracted strategic investors with private placements showed a higher level of corporate governance and better long-run performance in comparison to those launching private placements to financial investors only. This study reveals the differences between strategic and financial investors in their influences on short-term announcement effect, corporate governance, and long-run performance of a state-owned and -controlled listed company when they enter into private placement transactions with the company. These findings provide new perspectives on the economic consequences arising from the involvement of external institutional investors in private placements of state-owned and -controlled listed companies, which, to a certain extent, facilitate the decision-making process in private placement transactions and promote the mixed-ownership reform.

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