Abstract

http://ssrn.com/abstract=686903
 
 

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Why Do Public Firms Issue Private and Public Securities?


Armando R. Gomes


Washington University in Saint Louis - John M. Olin Business School

Gordon M. Phillips


University of Southern California; National Bureau of Economic Research (NBER)

November 2005


Abstract:     
We examine a comprehensive set of public firms' issues of private and public debt, convertibles and common equity securities. The market for public firms issuing private securities is large. Of the over 13,000 issues we examine, more than half are in the private market, with 81\% of small public firms issuing equity and convertibles choosing to issue privately. We find that asymmetric information, in particular, plays a large role in the public versus private market choice and the security type choice. Conditional on issuing in the public market, firms' predicted probability of issuing equity declines and issuing debt increases with measures of asymmetric information. We find a reversal of this sensitivity in the private market, firms' probability of issuing debt slightly declines with measures of asymmetric information. We also find large differences in the sensitivity of security issue decisions to market timing and trade-off variables in public and private markets.

Number of Pages in PDF File: 52

Keywords: Capital structure, financial structure, debt, equity, public, private

JEL Classification: G24, G32, G3

working papers series





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Date posted: March 17, 2005  

Suggested Citation

Gomes, Armando R. and Phillips, Gordon M., Why Do Public Firms Issue Private and Public Securities? (November 2005). Available at SSRN: http://ssrn.com/abstract=686903 or http://dx.doi.org/10.2139/ssrn.686903

Contact Information

Armando R. Gomes
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
3145607087 (Phone)
Gordon M. Phillips (Contact Author)
University of Southern California ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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