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Corporate Governance and Private Equity Placements

Author

Listed:
  • Yin Hua Yeh

    (Graduate Institute of Finance, National Chiao Tung University, Taiwan)

  • Pei Gi Shu

    (Graduate Institute of Management, Fu-Jen Catholic University, Taiwan)

  • Ming Sung Kao

    (Department of Finance and International Business, Fu-Jen Catholic University, Taiwan)

Abstract

In a private placement, the identity of the block purchaser has attracted much attention, while the characteristics of the issuing firm are sparsely noted. We hypothesize that the market concerns about the coupling between the issuing firm and the new block investor. Our empirical findings from a sample of 213 private equity placements in Taiwan indicate that the announcement effect of good-governance firms is significantly higher than that of bad-governance firms. Moreover, the induction of outside block investor further punctuates the coupling effect: the coupling between good-governance (poor-governance) firms and outside block investors yields even higher (lower) returns. Finally, the coupling effect remains significant in explaining the long-run performance of private-equity-placement firms.

Suggested Citation

  • Yin Hua Yeh & Pei Gi Shu & Ming Sung Kao, 2015. "Corporate Governance and Private Equity Placements," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-31.
    • Handle: RePEc:wsi:rpbfmp:v:18:y:2015:i:02:n:s0219091515500137
    DOI: 10.1142/S0219091515500137
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    More about this item

    Keywords

    Corporate governance; private equity placement; signaling;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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