Corporate Governance and Private Equity Placements

Yin Hua Yeh (), Pei Gi Shu () and Ming Sung Kao ()
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Yin Hua Yeh: Graduate Institute of Finance, National Chiao Tung University, Taiwan
Pei Gi Shu: Graduate Institute of Management, Fu-Jen Catholic University, Taiwan
Ming Sung Kao: Department of Finance and International Business, Fu-Jen Catholic University, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2015, vol. 18, issue 02, 1-31

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.

Keywords: Corporate governance; private equity placement; signaling (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1142/S0219091515500137

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