Ownership Structure and The Public / Private Equity Choice

38 Pages Posted: 19 Nov 2012 Last revised: 15 Mar 2015

See all articles by Emma Schultz

Emma Schultz

Australian National University (ANU)

Garry J. Twite

University of Melbourne - Department of Finance; University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Date Written: February 27, 2015

Abstract

We take advantage of both the relatively high concentration of insider ownership in Australian firms, absent the dominance of founding families, and the widespread issuance of non-tradable rights to examine the heterogeneous influence of insider and monitor shareholders in shaping the firm’s public/private choice. Specifically, by focusing on determinants of the underwriting arrangements in these issues, we highlight monitoring demand, not control dilution avoidance, as the key driver of the public/private choice in this general setting of firms controlled by non-founding insiders. Results show firms with larger, more concentrated pre-issue monitor shareholdings are more likely to undertake private placements. Further, post-issue ownership changes reveal this demand dependent on pre-issue ownership concentration: While firms with low monitor concentration use private placements as a means of acquiring additional monitoring, those with higher concentration use private placements to substitute insiders for monitors, reducing the level of independent oversight.

Keywords: Equity Issuance, Private/Public Choice,Insiders, Monitors, Rights Issues

JEL Classification: G32

Suggested Citation

Schultz, Emma and Twite, Garry J. and Twite, Garry J., Ownership Structure and The Public / Private Equity Choice (February 27, 2015). Available at SSRN: https://ssrn.com/abstract=2177454 or http://dx.doi.org/10.2139/ssrn.2177454

Emma Schultz

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Garry J. Twite (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

University of Melbourne - Faculty of Business and Economics ( email )

Department of Finance
Melbourne, VIC 3010
Australia
+61 3 90356172 (Phone)

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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