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

M. Normazia, Taufiq Hassan (), Mohamed Ariff () and M. Shamsher
Authors registered in the RePEc Author Service: Shamsher Mohamad

Global Finance Journal, 2013, vol. 24, issue 3, 203-221

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.

Keywords: Private placement; Wealth and volume effect; Financial crisis; Ownership concentration; Information asymmetry; Long run performance (search for similar items in EconPapers)
JEL-codes: G30 G32 G38 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:3:p:203-221

DOI: 10.1016/j.gfj.2013.10.003

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