Board independence and PIPE offerings
Journal
International Review of Economics and Finance
Journal Volume
75
Pages
478-500
Date Issued
2021-09
Author(s)
Abstract
Using hand-collected governance data and a two-stage least squares approach to control for the endogeneity of firm governance structure, this paper shows that private investments in public equity (PIPE) issuers with higher board independence grant investors lower price discounts and experience improved announcement effects, improved long-run operating and stock performance, and increased investment. Board independence also encourages issuers to place more shares with venture capital investors, and fewer shares with managerial investors. These findings suggest that strong independent governance can mitigate the agency costs inherent in PIPEs.
Subjects
Asymmetric information | Board independence | Managerial entrenchment | Private investment in public equity | Resolution of underinvestment
SDGs
Publisher
ELSEVIER
Type
journal article