The Impact of Income Smoothing on the Liquidity around Private Placement

• Main Authors: Lu-Ti Chiu, 邱綠緹
• Other Authors: Cheng-Shou Lu
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/46694064988237468701

碩士 === 國立高雄應用科技大學 === 商務經營研究所 === 100 === This study aimed to examine whether implementing income smoothing before private equity in Taiwan affect the liquidity after it. The subjects were the listed companies, which handled the private placement of ordinary shares from 2003 to 2010. The empirical results indicate that the relative bid-ask spreads after private equity were lower than before, which means that private equity can enhance the liquidity of the stock market. In addition, no matter it was before or after private equity, the income soothing can lower the relative bid-ask spread of stock, indicating that income smoothing can improve market liquidity. This also implies that investors believe the income smoothing behavior to be the important signal of the company's future prospects and growth opportunities. It could enhance investors’ confidence, leading to increased market liquidity. To wrap it up, income soothing can promote the market liquidity for the companies which dealt with private equity. Therefore, it can be concluded that income soothing before private-equity could eliminate information asymmetry to attract the investors to invest on the stocks and enhance market liquidity after private equity.