EconPapers    
Economics at your fingertips  
 

Equity raising by Asian firms: Choosing between PIPEs and SEOs

Sandeep Dahiya, Leora Klapper (), Harini Parthasarathy and Dorothe Singer

Journal of Corporate Finance, 2017, vol. 45, issue C, 64-83

Abstract: Why do some firms raise equity capital from a small number of “private” investors (e.g. Private Investment in Public Equities–PIPE), while other firms do so from a large number of small investors (e.g. Seasoned Equity Offering–SEO)? Recent studies list market timing, asymmetric information, and financial distress as the primary motives that drive the choice of equity raising mechanism. However, these results are based exclusively on the experience of US-based firms. This study examines 456 PIPE and 1910 SEO transactions of firms based in nine Asian countries to assess if the results reported for the US-based issuers are applicable to a wider set of firms. While market timing continues to be a significant driver of how firms choose between PIPE and SEO, unlike the US issuers, there is little evidence that Asian firms in our sample make this choice based on either asymmetric information or financial distress. As with the US firms, private investment provides significant certification for PIPE issuers. Finally, we find that both the operating performance as well as the stock price returns show little improvement for both PIPE as well as SEO issuers. Moreover, the difference between performance change of PIPE issuers is statistically indistinguishable from that of SEO issuers. This implies that PIPE investors do not provide meaningful benefits to the firms they invest in. Overall, our findings suggest that determinants for choosing specific equity issuance mechanism for international firms do not overlap completely with those for US-based firms.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119917302067
Full text for ScienceDirect subscribers only

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:eee:corfin:v:45:y:2017:i:c:p:64-83

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-02-10
Handle: RePEc:eee:corfin:v:45:y:2017:i:c:p:64-83