Why do firms underwrite private placement shares of other firms? Case of Japanese firms

Minoru Otsubo

Pacific-Basin Finance Journal, 2017, vol. 41, issue C, 75-92

Abstract: This paper focuses on listed firms as underwriters of private placement shares in Japan and investigates why they underwrite equity of other firms through private placements. In private placements, underwriting firms cannot necessarily enhance their shareholders' wealth, unlike the case of issuing firms, because they must incur costs associated with financial support through underwriting. However, they can enhance wealth when they acquire the control rights of issuing firms with a plan of business alliances after private placements. This result indicates that underwriting firms underwrite other firms' private placements to obtain a synergistic effect after acquisition of the control right.

Keywords: Equity private placement; Synergistic effect; Equity alliance; Corporate restructuring (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:41:y:2017:i:c:p:75-92

DOI: 10.1016/j.pacfin.2016.12.006

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