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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/31420
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| Title: | Private Placements to Owner-Managers: Theory and Evidence |
| Authors: | Subrahmanyam, Marti G.
Anshuman, V. Ravi
Marisetty, Vijaya B. |
| Issue Date: | 9-Jan-2012 |
| Series/Report no.: | FIN-11-045 |
| Abstract: | We present an asymmetric information model to examine private placements
issued to owner-managers. Our main conclusion is that allowing private
placements to insiders can mit- igate, if not eliminate, the
underinvestment problem. Our model predicts that announcement period
returns for private placements should be: (1) positive; (2) dependent on
regulatory constraints that determine the issue price; (3) positively
related to volatility; (4) negatively related to leverage; (5)
negatively related to owner-managers’ shareholdings (6) inversely
re- lated to proxies of manipulation; and (7) negatively related to
illiquidity. We empirically test our model’s predictions, along
with others from literature, on a sample of private placements issued in
the Indian capital markets during 2001-09 and report empirical evidence
largely consistent with the model. |
| URI: | http://hdl.handle.net/2451/31420 |
| Appears in Collections: | Finance Working Papers
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