Corporate governance and private equity placements

Yin-Hua Yeh, Pei Gi Shu, Ming Sung Kao*

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

In a private placement, the identity of the block purchaser has attracted much attention, while the characteristics of the issuing firm are sparsely noted. We hypothesize that the market concerns about the coupling between the issuing firm and the new block investor. Our empirical findings from a sample of 213 private equity placements in Taiwan indicate that the announcement effect of good-governance firms is significantly higher than that of bad-governance firms. Moreover, the induction of outside block investor further punctuates the coupling effect: the coupling between good-governance (poor-governance) firms and outside block investors yields even higher (lower) returns. Finally, the coupling effect remains significant in explaining the long-run performance of private-equity-placement firms.

Original languageEnglish
Article number1550013
JournalReview of Pacific Basin Financial Markets and Policies
Volume18
Issue number2
DOIs
StatePublished - 26 Jun 2015

Keywords

  • Corporate governance
  • private equity placement
  • signaling

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