Information Content of Private Equity Placement and the Determinants of Discount

Private placement of bonds and equities were introduced into Taiwan in 2001 and 2002 respectively, and they make companies to raise fund more flexibly. Though the mechanism of private equity placement has introduced for four years, research about this topic is rare. This thesis uses “event study” methodology to investigate the information content of private equity placement. This thesis also employs a regression model to analyze the relationship between cumulative abnormal returns and corporate financial structures. In addition, this thesis also uses a regression model to analyze the determinants of the price discount of private equity placement.

The thesis finds that the price reaction to private equity placement announcement is significantly positive, which supports that private equity placement has the positive information content. In addition, discount margin is positively related to cumulative abnormal returns. In the regression model of price discount, the results show that private equity placement fraction is positively related to discount margin, but growth is negatively related to discount margin.