A Global Analysis of Private Investments in Public Equity
49 Pages Posted: 21 Oct 2018
Date Written: September 27, 2018
This study examines the performance of firms issuing Private Investments in Public Equity (PIPEs) on a global setting and assesses how cross-country institutional characteristics affect the performance of PIPE issuers. We document a significant decline in the market valuation around the announcement of PIPE issues especially from 2004 to 2015 and find that firms participating in the PIPE market have worse fundamentals in terms of size, profitability and operating performance. We further find that PIPE issuers are followed by a significant negative long-term performance with this evidence being robust globally. Finally, consistent with law and finance theory that associates institutional quality with higher valuations, we show that country governance quality matters, as issuing firms operating in countries with better regulatory quality and higher law enforcement outperform others.
Keywords: Private Investment in Public Equity (PIPE), stock performance, cross-country differences, corporate governance, regulation
JEL Classification: G15, G18, G38
Suggested Citation: Suggested Citation