IDEAS home Printed from https://ideas.repec.org/a/jec/journl/v1y2005i1p57-83.html
   My bibliography  Save this article

Comparing the Characteristics and Performance of Private Equity Offering Firms with Seasoned Equity Offering Firms

Author

Listed:
  • Shin-Herng Michelle Chu

    (Finance, Real Estate & Law Department, California State Polytechnic University)

  • George H. Lentz

    (Finance; Real Estate & Law Department, California State Polytechnic University)

  • Espen Robak

    (Business & Real Estate Valuation Services, FMV Opinions Inc.)

Abstract

This paper examines why the majority of private placements of equity sell at substantial discounts, while a few sell at premiums. We compare private equity offering (PEO) firms with comparable seasoned equity offering (SEO) firms and find that PEO firms had poorer financial performance than SEO firms both prior and subsequent to the year of issue. Furthermore, PEO firms typically showed signs of financial distress prior to the equity issue. Our results also indicate that the holding period returns on investments in PEO firms were substantially below returns on the market index and worse than those of SEO firms. The financial characteristics and the holding period returns of PEO firms issuing at a price premium were found to be significantly better than those that sold at a discount. The private equity premiums may reflect risky future growth opportunities as well as potential takeover premiums.

Suggested Citation

  • Shin-Herng Michelle Chu & George H. Lentz & Espen Robak, 2005. "Comparing the Characteristics and Performance of Private Equity Offering Firms with Seasoned Equity Offering Firms," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 1(1), pages 57-83, January.
  • Handle: RePEc:jec:journl:v:1:y:2005:i:1:p:57-83
    as

    Download full text from publisher

    File URL: http://www.jem.org.tw/content/pdf/Vol.1No.1/05.pdf
    Download Restriction: no

    File URL: http://www.jem.org.tw/content/abstract/Vol.1No.1/English/05.htm
    Download Restriction: no

    More about this item

    Keywords

    private equity offering; seasoned equity offering; financial performance;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jec:journl:v:1:y:2005:i:1:p:57-83. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su). General contact details of provider: http://edirc.repec.org/data/cbfcutw.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.