Private placements of equity and firm value : value enhancing or value destroying?
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 t...
| Principais autores: | , |
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| Outros Autores: | |
| Formato: | Journal Article |
| Idioma: | English |
| Publicado em: |
2022
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| Acesso em linha: | https://hdl.handle.net/10356/153620 |
| _version_ | 1826129284547215360 |
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| author | Kang, Jun-Koo Park, James L. |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Kang, Jun-Koo Park, James L. |
| author_sort | Kang, Jun-Koo |
| collection | NTU |
| description | 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. |
| first_indexed | 2024-10-01T07:38:07Z |
| format | Journal Article |
| id | ntu-10356/153620 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T07:38:07Z |
| publishDate | 2022 |
| record_format | dspace |
| spelling | ntu-10356/1536202023-05-19T07:31:18Z Private placements of equity and firm value : value enhancing or value destroying? Kang, Jun-Koo Park, James L. Nanyang Business School Business::Finance Corporate Governance Agency Costs 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. Published version Park acknowledges financial support from the Asian Institute of Corporate Governance (AICG) and Korea University Business School Research Grant. 2022-01-07T01:14:28Z 2022-01-07T01:14:28Z 2021 Journal Article 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. https://dx.doi.org/10.1017/S0022109020000599 0022-1090 https://hdl.handle.net/10356/153620 10.1017/S0022109020000599 2-s2.0-85094150168 6 56 2072 2102 en Journal of Financial and Quantitative Analysis © 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). application/pdf |
| spellingShingle | Business::Finance Corporate Governance Agency Costs Kang, Jun-Koo Park, James L. Private placements of equity and firm value : value enhancing or value destroying? |
| title | Private placements of equity and firm value : value enhancing or value destroying? |
| title_full | Private placements of equity and firm value : value enhancing or value destroying? |
| title_fullStr | Private placements of equity and firm value : value enhancing or value destroying? |
| title_full_unstemmed | Private placements of equity and firm value : value enhancing or value destroying? |
| title_short | Private placements of equity and firm value : value enhancing or value destroying? |
| title_sort | private placements of equity and firm value value enhancing or value destroying |
| topic | Business::Finance Corporate Governance Agency Costs |
| url | https://hdl.handle.net/10356/153620 |
| work_keys_str_mv | AT kangjunkoo privateplacementsofequityandfirmvaluevalueenhancingorvaluedestroying AT parkjamesl privateplacementsofequityandfirmvaluevalueenhancingorvaluedestroying |