Research on Abnormal Return of Private Equity Placement
Date Issued
2007
Date
2007
Author(s)
Chen, Chen-Chih
DOI
zh-TW
Abstract
Private equity placement is an emerging way for corporations to fund. It saves time and costs, and is more flexible than public offering. Additionally, it does not have to disclose too much inside information and can solve the problem of information asymmetry. Until now, there have been almost one hundred Taiwanese companies raising money via this method.
Based on “the hypothesis of equity structure” and “the hypothesis of information asymmetry”, private equity placement changes the value of corporation. In recent years, there have been already many foreign academic studies focusing on the factors influencing the abnormal return of private equities. The first part of the study is to examine if the private equities are issued at premium or discount in the beginning. Then we use “event study” to check if abnormal returns exist in these private equities. In the third part, we collect the factors causing the abnormal return from foreign studies, and use simple regression model to see if these factors have the same effects on private equities in Taiwan.
We found that private equities in Taiwan were mostly sold at discount. Besides, the phenomenon of abnormal returns indeed occurred in some of these equities. We also found that the scale of private equity, P/B ratio, the scale of market value of company, the age of company, and the degree of concentration of equities have significant negative effects on abnormal returns. In the contrast, the discount has significant positive effect on abnormal return. These are all consistent with the results of foreign researches. However, the ratio of private equities, investment opportunity, financial crisis, and the ratio of manager to buy the private equities have different effects on private equities based on different estimated periods, and we also offer some explanations in this essay.
Subjects
私募股權
異常報酬
事件研究
股權結構
Private equity
abnormal return
event study
equity structure
information asymmetry
Type
thesis
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