PIPE and Corporate Governance

Independent directors can effectively reduce agency costs and information asymmetry when firms issue private investments in public equity (PIPEs). This paper uses hand-collected corporate governance data. Our empirical results show that the increase in board independence leads issuers to provide investors with less price discounts. The board independence also discourages issuers to place more shares to hedge fund investors. PIPE issuers perform a positive relation between board independence and initial announcement returns. Moreover, greater board independence mitigates poor post-issue stock and operating performance.