The choice between rights offerings and private equity placements [An article from: Journal of Financial Economics]

This digital document is a journal article from Journal of Financial Economics, published by Elsevier in . The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
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.