Performance of private investment in public entity transactions – evidence from the U.S. firms
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Abstract
This paper examines the post-announcement stock performance of U.S. public firms which issue equity privately, analyzed by firm and transaction characteristics. We find that firms which issue equity privately with the use of common equity do perform significantly better than if they would with the use of convertibles. Furthermore, firms with a relative high investment in R&D, e.g. biotechnology firms, do significantly outperform the market. However, a substantial part of the outperformance is linked to industry specific factors. No evidence is found to confirm that private placements enable entrenchment for incumbent management.
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Keywords
Private placements
References
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