Private placement, share prices, volume and financial crisis: An emerging market study

M. Normazia, Taufiq Hassan*, M. Ariff, M. Shamsher

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)203-221
Number of pages19
JournalGlobal Finance Journal
Volume24
Issue number3
DOIs
Publication statusPublished - 2013

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