Corporate Governance and Private Equity Placements

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.

Differential market valuations of board busyness across alternative banking models

“…Previous studies on firm valuation and value relevance 6 (e.g., Ball et al 2003;Zoubi et al 2016;Goncalves et al 2017) document that the value relevance of accounting information is important not only for investors but also for standard setters as it provides useful insights into several accounting issues. Moreover, information on non-financial indicators such as corporate governance mechanisms can still influence the ability of investors to price their firms and forecast future stock performance (Bose 2014;Yeh et al 2015).…”