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

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 placeme...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2013-09, Vol.53 (3), p.711-730
Main Authors: Huang, Hsu-Huei, Chan, Min-Lee
Format: Article
Language:English
Subjects:
Agency problem
Board composition
Corporate governance
Equity
Financial performance
G32
G34
Hypotheses
Outside directors
Ownership structure
Private placement
Private placement of equity
Stockholders
Studies
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Summary: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.
ISSN:0810-5391
1467-629X
DOI:10.1111/j.1467-629X.2012.00482.x