Abstract
We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 213-230 |
| Number of pages | 18 |
| Journal | Journal of Financial Economics |
| Volume | 108 |
| Issue number | 1 |
| DOIs | |
| State | Published - Apr 1 2013 |
| Externally published | Yes |
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Keywords
- Debt renegotiation
- Equity issuance
- Firm distress
- Private placements
- Shareholder coordination
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management
Cite this
Does shareholder coordination matter? Evidence from private placements. / Chakraborty, Indraneel; Gantchev, Nickolay.
In: Journal of Financial Economics, Vol. 108, No. 1, 01.04.2013, p. 213-230.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Does shareholder coordination matter? Evidence from private placements
AU - Chakraborty, Indraneel
AU - Gantchev, Nickolay
PY - 2013/4/1
Y1 - 2013/4/1
N2 - We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.
AB - We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.
KW - Debt renegotiation
KW - Equity issuance
KW - Firm distress
KW - Private placements
KW - Shareholder coordination
UR - http://www.scopus.com/inward/record.url?scp=84875809820&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84875809820&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2012.10.001
DO - 10.1016/j.jfineco.2012.10.001
M3 - Article
AN - SCOPUS:84875809820
VL - 108
SP - 213
EP - 230
JO - Journal of Financial Economics
JF - Journal of Financial Economics
SN - 0304-405X
IS - 1
ER -