Institutional Investment Horizons and the Stock Performance of Private Equity Placements: Evidence from the Taiwanese Listed Firms

Lee-Young Cheng (), Ming-Chang Wang () and Kung-Chi Chen ()
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Lee-Young Cheng: Department of Finance, National Chung Cheng University, #168 University Rd., Min-Hsiung, Chia-Yi, 62102, Taiwan
Ming-Chang Wang: Department of Business Administration, National Chung Cheng University, #168 University Rd., Min-Hsiung, Chia-Yi, 62102, Taiwan
Kung-Chi Chen: Department of Finance, National Chung Cheng University, #168 University Rd., Min-Hsiung, Chia-Yi, 62102, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2014, vol. 17, issue 02, 1-30

Abstract: This study examines how the investment horizon of the institutional shareholders of a firm affects the stock performance of private equity placements. The results show that firms with long-term institutional investors receive significantly positive abnormal returns around the offering announcement. Post-issue stock price underperformance is especially pronounced in firms held by short-term institutional investors. These findings suggest that private placement firms with long-term institutional investors acquire certification and monitoring-related benefits and thus reduce the information asymmetry and entrenchment costs between managers and external investors.

Keywords: Private equity placement; investment horizon; post-issue performance; quantile regression; G32 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S021909151450009X

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