Abstract

http://ssrn.com/abstract=1785463
 
 

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Does Shareholder Coordination Matter? Evidence from Private Placements


Nickolay Gantchev


University of North Carolina Kenan-Flagler Business School

Indraneel Chakraborty


Southern Methodist University (SMU), Cox School of Business

September 11, 2012

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.

Number of Pages in PDF File: 48

Keywords: Private placements, PIPE, Equity issuance, Shareholder coordination, Debt renegotiation, Financial distress

JEL Classification: G32, G33, G34

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Date posted: March 15, 2011 ; Last revised: September 18, 2012

Suggested Citation

Gantchev, Nickolay and Chakraborty, Indraneel, Does Shareholder Coordination Matter? Evidence from Private Placements (September 11, 2012). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1785463 or http://dx.doi.org/10.2139/ssrn.1785463

Contact Information

Nickolay Gantchev (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-4926 (Phone)
919-962-2068 (Fax)
HOME PAGE: http://sites.google.com/site/nickolaygantchev/

Indraneel Chakraborty
Southern Methodist University (SMU), Cox School of Business ( email )
6212 Bishop Blvd.
PO Box 750333
Dallas, TX 75275
United States
214-768-1082 (Phone)
HOME PAGE: http://indraneel.net
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