Protection of Investors’ Rights and the Long-Run Performance of Rule 144A Private Equity Offerings

Seoungpil Ahn, Gwangheon Hong


Equity private placement is the newest method of corporate financing strategy. The private equity financing under SEC Rule 144A is exploding and yet not much is known about the motivation behind private equity placement by public firms. Considering that privately placed firms have no bonding benefit, private equity investors would discount their capital by the amount of expected consumption of private benefits. Therefore, the issuers are unable to lower the cost of capital nor increase managerial perquisites. One possible motivation for private placement then is that firms offering the private DR increase their private benefits with the capital raised subsequently. Our approach is new to literature by incorporating both benefit (conceal private information) and cost (informational monopoly) associated with private equity financing.

Full Text:



Copyright (c) 2016 Asian Journal of Finance & Accounting

Asian Journal of Finance & Accounting ISSN 1946-052X


Copyright © Macrothink Institute


To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.