Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs

Why do some firms raise equity capital from a small number of “private” investors (e.g. Private Investment in Public Equities–PIPE), while other firms do so from a large number of small investors (e.g. Seasoned Equity Offering–SEO)? Recent studies list market timing, asymmetric information, and fina...

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Main Authors:	Dahiya, Sandeep, Klapper, Leora, Parthasarathy, Harini, Singer, Dorothe
Format:	Journal Article
Published:	Elsevier 2018
Subjects:	EQUITY CAPITAL EQUITY RAISING STOCK OFFERING INSTITUTIONAL INVESTORS
Online Access:	http://hdl.handle.net/10986/29321

id	okr-10986-29321
recordtype	oai_dc
spelling	okr-10986-293212021-05-25T10:54:43Z Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs Dahiya, Sandeep Klapper, Leora Parthasarathy, Harini Singer, Dorothe EQUITY CAPITAL EQUITY RAISING STOCK OFFERING INSTITUTIONAL INVESTORS Why do some firms raise equity capital from a small number of “private” investors (e.g. Private Investment in Public Equities–PIPE), while other firms do so from a large number of small investors (e.g. Seasoned Equity Offering–SEO)? Recent studies list market timing, asymmetric information, and financial distress as the primary motives that drive the choice of equity raising mechanism. However, these results are based exclusively on the experience of US-based firms. This study examines 456 PIPE and 1910 SEO transactions of firms based in nine Asian countries to assess if the results reported for the US-based issuers are applicable to a wider set of firms. While market timing continues to be a significant driver of how firms choose between PIPE and SEO, unlike the US issuers, there is little evidence that Asian firms in our sample make this choice based on either asymmetric information or financial distress. As with the US firms, private investment provides significant certification for PIPE issuers. Finally, we find that both the operating performance as well as the stock price returns show little improvement for both PIPE as well as SEO issuers. Moreover, the difference between performance change of PIPE issuers is statistically indistinguishable from that of SEO issuers. This implies that PIPE investors do not provide meaningful benefits to the firms they invest in. Overall, our findings suggest that determinants for choosing specific equity issuance mechanism for international firms do not overlap completely with those for US-based firms. 2018-02-06T16:04:44Z 2018-02-06T16:04:44Z 2017-08 Journal Article Journal of Corporate Finance 0929-1199 http://hdl.handle.net/10986/29321 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Elsevier Publications & Research :: Journal Article Publications & Research Asia Australia China China, Hong Kong SAR India Japan Korea, Republic of Singapore Taiwan, China Thailand
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	EQUITY CAPITAL EQUITY RAISING STOCK OFFERING INSTITUTIONAL INVESTORS
spellingShingle	EQUITY CAPITAL EQUITY RAISING STOCK OFFERING INSTITUTIONAL INVESTORS Dahiya, Sandeep Klapper, Leora Parthasarathy, Harini Singer, Dorothe Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
geographic_facet	Asia Australia China China, Hong Kong SAR India Japan Korea, Republic of Singapore Taiwan, China Thailand
description	Why do some firms raise equity capital from a small number of “private” investors (e.g. Private Investment in Public Equities–PIPE), while other firms do so from a large number of small investors (e.g. Seasoned Equity Offering–SEO)? Recent studies list market timing, asymmetric information, and financial distress as the primary motives that drive the choice of equity raising mechanism. However, these results are based exclusively on the experience of US-based firms. This study examines 456 PIPE and 1910 SEO transactions of firms based in nine Asian countries to assess if the results reported for the US-based issuers are applicable to a wider set of firms. While market timing continues to be a significant driver of how firms choose between PIPE and SEO, unlike the US issuers, there is little evidence that Asian firms in our sample make this choice based on either asymmetric information or financial distress. As with the US firms, private investment provides significant certification for PIPE issuers. Finally, we find that both the operating performance as well as the stock price returns show little improvement for both PIPE as well as SEO issuers. Moreover, the difference between performance change of PIPE issuers is statistically indistinguishable from that of SEO issuers. This implies that PIPE investors do not provide meaningful benefits to the firms they invest in. Overall, our findings suggest that determinants for choosing specific equity issuance mechanism for international firms do not overlap completely with those for US-based firms.
format	Journal Article
author	Dahiya, Sandeep Klapper, Leora Parthasarathy, Harini Singer, Dorothe
author_facet	Dahiya, Sandeep Klapper, Leora Parthasarathy, Harini Singer, Dorothe
author_sort	Dahiya, Sandeep
title	Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
title_short	Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
title_full	Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
title_fullStr	Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
title_full_unstemmed	Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs
title_sort	equity raising by asian firms : choosing between pipes and seos
publisher	Elsevier
publishDate	2018
url	http://hdl.handle.net/10986/29321
_version_	1764469049141493760

Equity Raising by Asian Firms : Choosing Between PIPEs and SEOs

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