Title

Private placement, share prices, volume and financial crisis: An emerging market study

Date of this Version

1-1-2013

Document Type

Journal Article

Publication Details

Citation only

Normazia, M., Hassan, T., Ariff, M., Shamsher, M. (2013). Private placement, share prices, volume and financial crisis: An emerging market study. Global Financial Journal, 24(3), 203-221.

Access the journal

2013 HERDC submission. FoR code: 150200

© Copyright Elsevier Inc., 2014

ISSN

1044-0283

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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This document has been peer reviewed.