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The initial private placement of equity and changes in operating performance in Taiwan


  • This research was funded by the National Science Council (NSC 98-2410-H-390-034). We are grateful to the editor of this journal for an encouraging response to my submission and to an anonymous referee for helpful comments on earlier versions of this paper.


We propose the corporate governance hypothesis which suggests that the outside blockholders arising from the private placement of equity are more likely to have a significantly positive effect on firms with poor corporate governance. Using a sample of Taiwan-listed firms with initial private placements of equity, our study’s results indicate that an improvement in operating performance is more likely to be seen after a private placement for those firms that are without independent directors, are controlled by a family, have lower insider shareholdings or are characterized by a pyramidal ownership structure. These findings are consistent with our hypothesis.