Private placement, share prices, volume and financial crisis: an emerging market study
Firms are increasingly resorting to private placements in recent years, yet there is no published study of emerging markets. There is a unique opportunity to study this behavior during a severe financial crisis, when firms resorted to private placements to recover financially distressed firms. Our a...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2013
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| Online Access: | http://psasir.upm.edu.my/id/eprint/28345/2/Private%20placement.pdf http://psasir.upm.edu.my/id/eprint/28345/ |
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| Summary: | Firms are increasingly resorting to private placements in recent years, yet there is no published study of emerging markets. There is a unique opportunity to study this behavior during a severe financial crisis, when firms resorted to private placements to recover financially distressed firms. Our analysis using data over fifteen years shows (a) a significant 2–3% positive share price reaction, affirming asymmetric information effect, (b) a significant volume activity, and (c) the price impact is different across a period of a major financial crisis. If the proceeds from placement are earmarked for investment, share price is negatively (positively) correlated during the crisis (non-crisis) periods. Our finding on regulation is inconsistent with prior reports in developed markets: this is explained by the stricter restrictions on trading of private issues in emerging market. These results provide modest new contributions to the literature on private placements. |
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