Does shareholder coordination matter? Evidence from private placements

Indraneel Chakraborty and Nickolay Gantchev

Journal of Financial Economics, 2013, vol. 108, issue 1, 213-230

Abstract: We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.

Keywords: Private placements; Equity issuance; Shareholder coordination; Debt renegotiation; Firm distress (search for similar items in EconPapers)
JEL-codes: G32 G33 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:108:y:2013:i:1:p:213-230

DOI: 10.1016/j.jfineco.2012.10.001

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