Private placement,share prices,volume and financial crisis: An emerging market study |
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Authors: | M Normazia Taufiq Hassan M Ariff M Shamsher |
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Institution: | 1. Department of Accounting and Finance, Faculty of Economics and Management, University Putra Malaysia, Serdang, Selangor 34400, Malaysia;2. Department of Finance, Bond University, Gold Coast, Queensland 4229, Australia;3. International Centre for Education in Islamic Finance (INCEIF), 59100 Kuala Lumpur, Malaysia |
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Abstract: | Firms are increasingly resorting to private placements in recent years, yet there is no published study of emerging markets. There is a unique opportunity to study this behavior during a severe financial crisis, when firms resorted to private placements to recover financially distressed firms. Our analysis using data over fifteen years shows (a) a significant 2–3% positive share price reaction, affirming asymmetric information effect, (b) a significant volume activity, and (c) the price impact is different across a period of a major financial crisis. If the proceeds from placement are earmarked for investment, share price is negatively (positively) correlated during the crisis (non-crisis) periods. Our finding on regulation is inconsistent with prior reports in developed markets: this is explained by the stricter restrictions on trading of private issues in emerging market. These results provide modest new contributions to the literature on private placements. |
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