Grabbing or Compensating? Evidence From Private Investment in Public Equity in China

Yanjian Zhu, Jiajing Xu and Fan Yu

Accounting and Finance, 2025, vol. 65, issue 3, 2842-2865

Abstract: We explore the mechanisms of interest grabbing and compensation in private investment in public equity (PIPE) events. The participation of affiliated and strategic investors commands significant issuance discounts for various reasons. Affiliated investors often sell their stakes after the lockup period and manipulate corporate dividend policies for personal gains. Their participation is associated with increased receivables and related‐party transactions, leading to overleveraging and inefficient investments. However, strong governance can mitigate these adverse effects. Conversely, strategic investors, as long‐term shareholders, enhance corporate governance and firm value. Therefore, issuance discounts reflect affiliated investors' grabbing behaviour and compensation mechanisms for strategic investors.

Date: 2025
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