Differential Shareholder Wealth Effects of Private Equity Placements in New Zealand

49 Pages Posted: 22 Mar 2004

See all articles by Hamish D. Anderson

Hamish D. Anderson

Massey University - School of Economics and Finance

Lawrence C. Rose

Massey University

Steven F. Cahan

University of Auckland Business School

Date Written: March 2004

Abstract

The New Zealand market allows us to explore the effect of a less restrictive private placement regulatory environment compared to the US and other countries where private placements have already been examined. Examples include no resale restrictions on shares purchased through private placements and no restriction on discount size. We find a strong positive relationship between abnormal announcement returns and the price at which shares are placed, suggesting that placement price conveys important information regarding firm quality and value. Private placements issued at a premium exhibit a permanent positive impact on firm value. In contrast, those placed at a discount experience negative announcement returns and show a significant run-down in returns following the announcement. We also find evidence that purchasers of discounted private placements may be taking advantage of relatively weak regulations governing private placements in New Zealand by immediately selling the new shares for a profit.

Keywords: Seasoned equity, private placements, shareholder wealth

JEL Classification: G14, G35, G38

Suggested Citation

Anderson, Hamish D. and Rose, Lawrence (Larry) Craig and Cahan, Steven F., Differential Shareholder Wealth Effects of Private Equity Placements in New Zealand (March 2004). Available at SSRN: https://ssrn.com/abstract=519143 or http://dx.doi.org/10.2139/ssrn.519143

Hamish D. Anderson (Contact Author)

Massey University - School of Economics and Finance ( email )

New Zealand

Lawrence (Larry) Craig Rose

Massey University ( email )

Private Bag 102-904
North Shore Mail Centre
Auckland, 0745
New Zealand
+64 9 4140800, ex 9558 (Phone)
+64 9 441 8150 (Fax)

Steven F. Cahan

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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