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Title: Private placements of equity and transactions with existing blocks of shares : evidence from UK listed companies
Author: Dionysiou, Dionysia
Awarding Body: University of Edinburgh
Current Institution: University of Edinburgh
Date of Award: 2010
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Prior studies suggest that theories on equity offerings applicable to the US are not always applicable to the UK. Further, to my knowledge, little evidence exists on pure UK private placings and, no evidence on blocks of already listed shares (secondary offers). This study considers this lack of evidence and contributes to the extant literature by investigating these two types of equity offerings. More specifically, the study focuses on three main themes: the placing offered discount or premium, the long-run abnormal performance surrounding the offers and, whether the US puzzling reversal of private placement abnormal returns (AR) is also valid in the UK. With regards to the first theme, OLS analysis suggests that information costs and liquidity costs are the main determinants of the discount of private placements. Concerning the secondary offerings, they are also mainly priced at discount. However, the secondary offering discount appears to reflect uncertainty about the stock value. The findings contradict the US evidence that imply stonger monitoring costs, especially for the secondary sample. Premiums reflect extraction of private benefits, regardless of the offer type. Regarding the second theme, the performance of private placing firms peaks at the offer year and turns negative few years later. The findings suggest the firms time the offer when the stock is overvalued and indicates high selling growth opportunities. While the findings for secondary offers suggest post-offer underperformance, the firms also engage into downwards earnings management the year before the offer. These factors explain the post-offer underperformance. Finally, concerning the third theme, the reversal is also observed in the UK. However, when liquidity and pre-event momentum risk factors are taken into account, the post-offer underperformance disappears. The findings strongly suggest that the traditional models used to measure long-run AR are misspecified. They are unable to adjust for reduction in liquidity risk which changes the risk factor loadings. Hence, the reported AR are downwards biased. As a conclusion, the study adds to the body of knowledge within the equity offerings area. It also contributes to theories such as signalling, agency and market efficiency. Finally, it provides methodological suggestions.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available