دانلود رایگان مقاله انگلیسی عدم تقارن اطلاعات و نظارت بر سرمایه گذاری های خصوصی به همراه ترجمه فارسی
| عنوان فارسی مقاله: | عدم تقارن اطلاعات و نظارت بر سرمایه گذاری های خصوصی |
| عنوان انگلیسی مقاله: | Information asymmetry and monitoring in equity private placements |
| رشته های مرتبط: | علوم اقتصادی، حسابداری، حسابداری مالی، اقتصاد مالی و اقتصاد پولی |
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| نشریه | الزویر – Elsevier |
| کد محصول | f178 |
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بخشی از مقاله انگلیسی: Abstract This paper systematically examines the factors that determine price discounts and announcement effects of equity private placements conducted by firms in Taiwan from 2002 to 2008. Different with most studies of private placements using available observations as a whole sample, our study separates the whole sample into subsamples by exchange-listed firms and OTC firms. The results for OTC firms corroborate the information hypothesis; the discounts serve as compensation for investor’s costs of assessing firms, while abnormal returns reflect the information about firm quality. On the other hand, the empirical results show that some of our findings support an information explanation and some support a monitoring explanation in the case of exchange-listed firms. It seems that there are different motives behind the exchange-listed firms placing equity privately. 1. Introduction The private placement market has escalated rapidly worldwide during the past few years. For example, the amount of private placements in the US (the United States) dramatically increased from $1.87 billion in 1995 to $51.9 billion in 2009. Taiwan’s private placement market has also expanded annually after the enactment of relevant regulations in 2002. In 2009, issuing firms conducted 181 private placements, amounting to $5.46 billion, which accounts for 25.36% of the total amount of private and public placements in Taiwan.1 These figures indicate that private placement has become an important financing alternative for companies seeking capital. “Private placement” implies offering equity to a selective number of institutions or high wealth investors. Firms choose private placements primarily because the simplified issuance procedures and lower flotation costs expedite issuance (Anderson, Rose, & Cahan, 2006; Fenn, 2000; Krishnamurthy, Spindt, Subramaniam, & Woidtke, 2005). However, this measure could dilute the ownership of current non-participating shareholders. To safeguard these shareholders’ rights, stock exchanges typically enforce specific regulations for private placements (Anderson et al., 2006), including qualification restrictions on investors and resale restrictions on private equity shares. Screening investors may help resolve information asymmetry problems, which are more severe in private placement firms that are new and small, covered by fewer stock market analysts, tending to be listed on the OTC, or deriving most of their value from growth opportunities (Lee & Wu, 2009; Marciukaityte, Szewczyk, & Varma, 2005; Wu, 2004). The private placement resale restrictions affect the pricing of shares. When the majority of block shares are traded at a premium (Barclay & Holderness, 1989; Barclay, Holderness, & Sheehan, 2007; Wayne & Hailu, 1991), private equity has always been offered at a discount. The discounts compensate investors for higher trading costs such as illiquidity (Silber, 1991); thus, investors are able to freely transfer private equity shares only after a holding period of two or three years (lockup period) in most countries. Because investors can’t arbitrage by quick turnaround within the lockup period, they must bear the economic risk and thus have the incentives to play the gatekeeping role to monitor firms (Coffee, 1995). This involves the ownership structure hypothesis which suggests that outside blockholders created by private placements offer monitoring services and then increase firm value. In general, the theories commonly applied to the announcement effects and pricing in private placements include the information hypothesis and the ownership structure hypothesis. However, empirical evidence from different countries or different stock exchanges supports different theories. This makes us wonder whether the different sample will lead to different results, and which factors influence the results. To explore this, the view of Hertzel and Smith (1993) sheds some light. They suggest that the relative importance between the information hypothesis and the ownership structure hypothesis for private placements depends on firm size. In general, smaller firms tend to be growing, illiquid and with higher managerial ownership, so resolving information asymmetry problems seems more important. In contrast, larger firms are more liquid but with lower managerial ownership, therefore increased monitoring or incentive alignment becomes relatively important. In Taiwan, there are two main stock markets: centralized market (Taiwan Stock Exchange, TSE) and over-the-counter market (GreTai Securities Market, OTC). Due to the level of listing requirements for securities traded on TSE and OTC being very different, except for the difference in firm size, the governing regulations and the market characteristics between TSE and OTC are also quite different.2 Therefore, we consider it valuable to explore the differences between TSE and OTC markets, and the empirical results will be more useful for managers’ financing decisions in firms listed on different exchanges. While reviewing the literature, though there is ample empirical evidence to support different hypotheses on private placements, no serious attempt has yet been made to examine whether they apply to both centralized markets and OTC markets. The OTC market exhibits a higher level of information asymmetry than that of the centralizedmarket. As private placementsmay help mitigate information asymmetry, it would be interesting to explore whether this financing tool is more effective for OTC markets or for centralized markets. In literature, we discovered that only Alli and Thompson (1993) cover exchange-listed and OTC firms but they do not conduct a detailed cross-sectional analysis. Moreover, their results are limited by the low number of sample firms and research variables. Moreover, differences in regulations among countries also modify empirical results in private placements. Except for resale restrictions, private placement regulations on private equity investors, amount, or discounts are stricter in Singapore than in Taiwan and the US, thus altering the empirical results. For example, there are no limits on private placement amount and discounts in Taiwan and in the US. Empirical results reveal that the maximum equity fraction placed, average discounts, and private placement abnormal returns in these two countries are higher than in Singapore (Chen, Ho, Lee, & Yeo, 2002a; Hertzel & Smith, 1993; Jang, Tsai, & Kuo, 2010; Wruck, 1989). This study divides the entire sample into two subsamples – exchange-listed and OTC firms, and examines the factors that determine private placement discounts and the manner in which investors respond to private placement announcements. Hence, we hope this research will contribute to the literature on private placements in the case of Taiwan. In conclusion, our results corroborate the information hypothesis in OTC firms. The discounts serve as compensation for the investor’s costs of assessing the firm, while abnormal returns reflect the information about firm quality. On the other hand, the empirical results show that some of our findings support an information explanation and some support a monitoring explanation in the case of the TSE firms. The discounts compensate investors for both information costs and expected monitoring services, while announcement effects reflect both the information about firm quality and the benefits of increased monitoring. Intending to pursue control benefits, single investors participate in private placements in order to obtain control premium. The evidence substantiating this claim is fairly conclusive in exchange-listed firms. In addition to introduction, the paper is organized as follows: Section 2 presents the regulatory environment and market characteristics in Taiwan. Section 3 reviews the relevant literature on private placements. Section 4 details research methodology. Section 5 contains the sample descriptions and empirical results, and conclusions are presented in Section 6. |