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Impact of entrenched ultimate owners’ self-dealing on SEO methods choice and discounts of private placements––Evidence from listed companies in China

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  • Jia, Gang
  • Li, Wanli
  • Zhang, He

Abstract

This study investigates how ultimate owners' self-dealing motivations can affect seasoned equity offering (SEO) methods using the data on listed companies in China during 2006–2015. We find that public equity offerings conduce to enhanced ultimate owner's control and preserve the control structure of the issuers. Moreover, there is a significant positive relation between controlling shareholder's control margin and the likelihood of choosing a private placement. A firm is more likely to choose public offerings in the presence of multiple large shareholders. Further tests show that self-dealing motivations significantly affect price discounts of private placements.

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  • Jia, Gang & Li, Wanli & Zhang, He, 2019. "Impact of entrenched ultimate owners’ self-dealing on SEO methods choice and discounts of private placements––Evidence from listed companies in China," Emerging Markets Review, Elsevier, vol. 38(C), pages 404-422.
    • Handle: RePEc:eee:ememar:v:38:y:2019:i:c:p:404-422
    DOI: 10.1016/j.ememar.2018.11.001
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    More about this item

    Keywords

    Entrenchment; Self-dealing; SEO; Private placements;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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