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Private placements of convertible securities: stock returns, operating performance and abnormal accruals

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  • Jan L. Williams
  • Alex P. Tang
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    Abstract

    This study examines long-run stock returns, operating performance and abnormal accruals of private placements of convertible securities. We investigate the effects surrounding private placements to test and differentiate the implications of several competing hypotheses. While the monitoring and certification hypotheses suggest positive effects, the managerial entrenchment, overvaluation and windows-of-opportunity hypotheses suggest the opposite. We find that placing firms generally experience positive effects in the pre-periods and negative effects in the post-periods. Our overall findings are more consistent with the predictions of the overvaluation and windows-of-opportunity hypotheses while our post-placement evidence is also consistent with the predictions of the managerial entrenchment hypothesis. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

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    Bibliographic Info

    Article provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting & Finance.

    Volume (Year): 49 (2009)
    Issue (Month): 4 ()
    Pages: 873-899

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    Handle: RePEc:bla:acctfi:v:49:y:2009:i:4:p:873-899

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