Economics at your fingertips  

Market timing in private equity placements: Empirical evidence from China

Yong Huang, Konari Uchida, Xuanying Yu and Daolin Zha

Pacific-Basin Finance Journal, 2021, vol. 69, issue C

Abstract: This paper examines the motivation for private equity placements (PEPs) of listed firms in China. We find that private placement firms are overvalued more than their non-issuing counterparts at announcement and issuance. The result is robust to various measures of mispricing. Additional analyses suggest that the stock prices of private placement firms outperform in the pre-announcement period and underperform in the post-issue period. Considering the widespread practice of discounting privately placed shares, overvaluation over the issuance process helps decrease discounts while increasing the PEPs' attractiveness for investors. Through successful market timing, the shares of private placement firms can be offered at overvalued prices even after considering discounts. Overall, these findings suggest that firms use private equity placements to time the market.

Keywords: Market timing; Private equity placements; Seasoned equity offerings; China (search for similar items in EconPapers)
JEL-codes: G14 G18 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
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:

DOI: 10.1016/j.pacfin.2021.101642

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-01-25
Handle: RePEc:eee:pacfin:v:69:y:2021:i:c:s0927538x21001499