Board independence and PIPE offerings

Ching-Yu Hsu, Sheng-Syan Chen and Chia-Wei Huang

International Review of Economics & Finance, 2021, vol. 75, issue C, 478-500

Abstract: Using hand-collected governance data and a two-stage least squares approach to control for the endogeneity of firm governance structure, this paper shows that private investments in public equity (PIPE) issuers with higher board independence grant investors lower price discounts and experience improved announcement effects, improved long-run operating and stock performance, and increased investment. Board independence also encourages issuers to place more shares with venture capital investors, and fewer shares with managerial investors. These findings suggest that strong independent governance can mitigate the agency costs inherent in PIPEs.

Keywords: Private investment in public equity; Board independence; Asymmetric information; Managerial entrenchment; Resolution of underinvestment (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:75:y:2021:i:c:p:478-500

DOI: 10.1016/j.iref.2021.04.018

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