Competitors’ stock price reactions in response to private equity placements: evidence from a transitional economy

M. M. Fonseka, R. L. Theja N. Rajapakse and Gao-Liang Tian

Economic Research-Ekonomska Istraživanja, 2018, vol. 31, issue 1, 550-575

Abstract: This paper examines whether information conveyed by private equity placement decisions transfers to non-applying companies within the same industry. In particular, it investigates the impact of a company’s announcements of the application for, withdrawal, rejection, approval and completion of private equity placement, while examining the cross-sectional differences of the market performance of their industry counterparts, both in the short- and long-term. It was found that an intra-industry reaction exists; competitors experience a decrease in stock prices in response to the announcement of the application for, approval and completion of private equity placement and an increase in stock prices around the announcement of the withdrawal or rejection of applications. Further, it was found that competitors experience a decrease in their long-term stock performance following private placements. A higher discount on private equity placement is detrimental for private equity (P.E.) issuing companies in the long-term. This study, therefore, provides evidence of the existence of a contagion effect in the long-term while a competitive effect dominates in the short-term.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1331677X.2018.1429293 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:taf:reroxx:v:31:y:2018:i:1:p:550-575

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rero20

DOI: 10.1080/1331677X.2018.1429293

Access Statistics for this article

Economic Research-Ekonomska Istraživanja is currently edited by Marinko Skare

More articles in Economic Research-Ekonomska Istraživanja from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().