The choice between rights offerings and private equity placements

Henrik Cronqvist, Mattias Nilsson

Research output: Contribution to journalArticlepeer-review

86 Scopus citations

Abstract

We develop and test a nested logit model to examine how firms choose between a rights offering and a private equity placement. Family controlled firms avoid issue methods that dilute control benefits or subject them to more monitoring, especially when the family's control margin is small and the wedge between votes and capital is large. Control considerations also affect security design. Private placements reduce contracting and ex post holdup costs in new product market relationships. Finally, firms with higher asymmetric information about firm value tend to involve underwriter certification in a rights offering, and to choose a private placement when information asymmetries are extreme.

Original languageEnglish (US)
Pages (from-to)375-407
Number of pages33
JournalJournal of Financial Economics
Volume78
Issue number2
DOIs
StatePublished - Nov 2005
Externally publishedYes

Keywords

  • Private equity placements
  • Rights offerings
  • Seasoned equity offerings

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Fingerprint

Dive into the research topics of 'The choice between rights offerings and private equity placements'. Together they form a unique fingerprint.

Cite this