Private Placements of Convertible Securities: Stock Returns, Operating Performance and Abnormal Accruals

27 Pages Posted: 24 Nov 2009

See all articles by Jan L. Williams

Jan L. Williams

University of Baltimore

Alex P. Tang

Morgan State University

Abstract

This study examines long-run stock returns, operating performance and abnormal accruals of private placements of convertible securities. We investigate the effects surrounding private placements to test and differentiate the implications of several competing hypotheses. While the monitoring and certification hypotheses suggest positive effects, the managerial entrenchment, overvaluation and windows-of-opportunity hypotheses suggest the opposite. We find that placing firms generally experience positive effects in the pre-periods and negative effects in the post-periods. Our overall findings are more consistent with the predictions of the overvaluation and windows-of-opportunity hypotheses while our post-placement evidence is also consistent with the predictions of the managerial entrenchment hypothesis.

Suggested Citation

Williams, Jan L. and Tang, Alex P., Private Placements of Convertible Securities: Stock Returns, Operating Performance and Abnormal Accruals. Accounting & Finance, Vol. 49, Issue 4, pp. 873-899, December 2009, Available at SSRN: https://ssrn.com/abstract=1512868 or http://dx.doi.org/10.1111/j.1467-629X.2009.00311.x

Jan L. Williams (Contact Author)

University of Baltimore ( email )

Merrick School of Business
1420 N. Charles Street
Baltimore, MD 21201
United States
410.837.6593 (Phone)
410.837.5722 (Fax)

Alex P. Tang

Morgan State University ( email )

1700 E. Cold Spring Ln
Baltimore, MD 21251
United States

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