Do large shareholders collude with institutional investors? Based on the data of the private placement of listed companies

Yong-Ping Ruan, Xin Song and Kai Zheng

Physica A: Statistical Mechanics and its Applications, 2018, vol. 508, issue C, 242-253

Abstract: What role on earth do the institutional investors play in the private placement of listed company? Is it the “balance of interests” or the “large shareholders of conspiracy”? In this paper, we measured the private placement discount and financing purposes to examine the role of institutional investors in the targeted private placement. The research shows that the large shareholders deliver self-benefit through higher discount of private placement, and with the increase in the proportion of large shareholders, the discount rate is significantly higher. The participation of institutional investors can effectively reduce the issuance discount rate. The large shareholders were more involved in the capital operation case of the private placement from the standpoint of their own interests, while institutional investors were more involved in the project financing case of the private placement. The results of the study indicate that institutional investors play a passive role in the private placement led by large shareholders. Institutional investors do not collude with large shareholders to manipulate pricing and operate the capital, instead they are project participants, who get stock at a high price and promote enterprise projects. Institutional investors have played a key role in balancing large shareholders interests, maintaining market equity, and promoting the rational allocation of resources as well as protecting the interests of small and medium-sized investors.

Keywords: Private placement; Institutional investors; Conspiracy; Discount (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:508:y:2018:i:c:p:242-253

DOI: 10.1016/j.physa.2018.05.090

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