Tunneling,Information Asymmetry,and Private Placement Discounts

Private placement has become an increasingly important method of equity refinancing for regulators, listed companies, and investors. This paper analyzes factors influencing private placement discounts based on the controlling shareholder’s opportunistic behavior and information asymmetry. Our findings indicate that the type of subscriber is a key determinant of the private placement discount, particularly when the subscriber is the controlling shareholder. Asymmetric information between listed companies and investors is another important determinant: The higher the degree of information asymmetry, the greater the private placement discounts.