Relationships, Corporate Governance, and Performance: Evidence from Private Placements of Common Stock

Karen H. Wruck and YiLin Wu
Additional contact information
Karen H. Wruck: Ohio State U
YiLin Wu: National Tsing Hua University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Utilizing a large sample with unique data gathered directly from private placement contracts, we address two important questions that remain unresolved in the literature. First, what types of relationships connect private placement investors and issuers, and how do these relationships affect issuer performance, deal structure and corporate governance? Second, do relationships between issuers and investors, or a lack thereof, shed light on the performance "puzzle" associated with private placements? Our primary finding is a strong, positive association between new relationships formed around the time of a placement and issuer performance at announcement and post-placement. The vast majority of new relationships are governance-related, so our findings are consistent with increased monitoring and/or stronger governance creating value for investors. We also find that relationship investors are more likely to gain governance influence than other investors. Issuers in "new economy" industries and with high specific risk grant investors more governance influence than other issuers, suggesting that access to governance is especially valuable when information asymmetries and/or specific investments are important.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-bec and nep-cta
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-18.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-18.pdf [301 Moved Permanently]--> https://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-18.pdf [301 Moved Permanently]--> https://fisher.osu.edu/fin/dice/papers/2007/2007-18.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2007-18

Access Statistics for this paper

More papers in Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().