Private placements of convertible securities: stock returns, operating performance and abnormal accruals
Version of Record online: 30 JUN 2009
© The Authors. Journal compilation © 2009 AFAANZ
Accounting & Finance
Volume 49, Issue 4, pages 873–899, December 2009
How to Cite
Williams, J. L. and Tang, A. P. (2009), Private placements of convertible securities: stock returns, operating performance and abnormal accruals. Accounting & Finance, 49: 873–899. doi: 10.1111/j.1467-629X.2009.00311.x
- Issue online: 20 NOV 2009
- Version of Record online: 30 JUN 2009
- Received 30 August 2008; accepted 13 March 2009 by Robert Faff (Editor).
- Private placements;
- Convertible securities;
- Stock returns;
- Operating performance;
- Abnormal accruals
This study examines long-run stock returns, operating performance and abnormal accruals of private placements of convertible securities. We investigate the effects surrounding private placements to test and differentiate the implications of several competing hypotheses. While the monitoring and certification hypotheses suggest positive effects, the managerial entrenchment, overvaluation and windows-of-opportunity hypotheses suggest the opposite. We find that placing firms generally experience positive effects in the pre-periods and negative effects in the post-periods. Our overall findings are more consistent with the predictions of the overvaluation and windows-of-opportunity hypotheses while our post-placement evidence is also consistent with the predictions of the managerial entrenchment hypothesis.