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Dissertation
Issues in public and private equity offerings
Doctor of Philosophy (Ph.D.), Drexel University
2001
DOI:
https://doi.org/10.17918/00009761
Abstract
This study examines post-issue performance of public and private equity issuers. The samples of primary, combination, and secondary public seasoned equity offerings include offerings made during the period 1974 to 1997. The sample of private primary equity placements includes placements made during the period 1979 to 1994. Secondary equity issuers significantly overperform, while primary (public and private) and combination equity issuers underperform matching companies in the five year post-issue period. I find some support for the incorrect risk matching explanation of underperformance for public primary and combination equity issuers. The results are inconsistent with the predictions of investor overoptimism, the Barberis, Shleifer, Vishny (1998) investor sentiment model, and the Daniel, Hirshleifer, Subramanyam (1998) model. However, they are consistent with the representativeness heuristic. Also, the results show that abnormal performance is stronger when uncertainty is higher. Secondary equity issuers overperformance is stronger for smaller companies, issues made in December, and for issues in which sellers have strong reasons to sell the shares. Overperformance is smaller or does not exist for issues in which the seller is related to management. Post-placement performance is worse for companies with low book-to-market value, for companies with high standard deviation of earnings forecasts, companies with negative prior earnings, developing and distressed companies. The results are inconsistent with the hypotheses that in general private equity placements increase the value of company by providing quality certification or improved monitoring. Companies that have positive investor reaction to the placement announcement have even worse post-placement performance than other placing companies. However, the placements made to managers or significant shareholders seem to increase the company value. Positive investor reaction to the placement announcement followed by increase in the number of public equity issues and poor stock price performance suggest that, although incorrectly, investors may be believing that private equity placements provide quality certification.
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Details
- Title
- Issues in public and private equity offerings
- Creators
- Dalia Marciukaityte
- Contributors
- Samuel Hideyo Szewczyk (Advisor) - Drexel University, Drexel University (1970-)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Number of pages
- xi, 152 pages
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business; Finance; Drexel University
- Other Identifier
- 991021889086504721