The Valuation Effects of Private Placements of Public Corporations' Common Stock

Outside shareholders should benefit when the firm issues common stock through a private placement. The researchers' propositions are that the private issue of common equity creates a value-maximizing insider that has the incentive and ability to monitor and discipline, and thereby reduce agency...

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Bibliographic Details
Published inThe journal of entrepreneurial finance Vol. 1; no. 3; p. 205
Main Authors McDaniel, Wm R, McDaniel, William R
Format Journal Article
LanguageEnglish
Published Greenwich Pepperdine University, Graziadio School of Business and Management 01.12.1992
Subjects
Advantages
Common stock
Costs
Equity
Hypotheses
Investments
Personnel policies
Private placement
Regulation D
Regulation of financial institutions
SEC registration
Small business
Stockholders
Studies
Tender offers
Value added
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Summary:Outside shareholders should benefit when the firm issues common stock through a private placement. The researchers' propositions are that the private issue of common equity creates a value-maximizing insider that has the incentive and ability to monitor and discipline, and thereby reduce agency costs and investors can reduce uncertainty about the value of thinly traded stock by observing the share price negotiated by the well-informed buyer. Both of these benefits are especially applicable to small firms. Their empirical evidence supports hypotheses based on these propositions.
ISSN:2373-1753
2373-1761
DOI:10.57229/2373-1761.1122