The effects of financial characteristics on price discounts in private placement

• Main Author: 藍亦敏
• Other Authors: 張清福
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/26768489699453828932

碩士 === 國立政治大學 === 會計研究所 === 98 === This study examines the effects of financial characteristics on price discounts in private placement. Based on the Market Observation Post System, the sample includes private placements of all listed and OTC firms in Taiwan during 2002 to April of 2010. The empirical evidence shows that discounts will be larger when private placement size is large relative to firm size. Intangible assets are difficult to value and therefore private placement investors will require larger discounts as compensation. If the issuer’s purposes of private placement indicate the availability of positive NPV investment opportunity to the firm then the discount will be smaller. In addition, the ROE variable has significant and negative association with discounts. This is consistent with the expectation that investors will assess the quality of the firm’s existing assets to form an opinion on risk and expected return of their private equity investment. On the other hand, high debt levels as measured by debt to equity result in higher discounts. Moreover, the existence of financial crisis is positively associated with discounts. In a word, the size of the discount to current market price is strongly related to proxies for the quality of the firm’s financial characteristics, future prospects and risk.