1. bookVolumen 17 (2022): Heft 1 (April 2022)
Zeitschriftendaten
License
Format
Zeitschrift
eISSN
2344-5416
Erstveröffentlichung
06 Mar 2015
Erscheinungsweise
3 Hefte pro Jahr
Sprachen
Englisch
access type Uneingeschränkter Zugang

Tunneling Through Private Equity Placements: Evidence from Japan

Online veröffentlicht: 31 May 2022
Volumen & Heft: Volumen 17 (2022) - Heft 1 (April 2022)
Seitenbereich: 238 - 255
Zeitschriftendaten
License
Format
Zeitschrift
eISSN
2344-5416
Erstveröffentlichung
06 Mar 2015
Erscheinungsweise
3 Hefte pro Jahr
Sprachen
Englisch
Abstract

This paper examines the tunneling issue of controlling shareholders, and in particular, this empirical study is conducted to determine whether controlling shareholders are tunneling the wealth of companies by using private equity placements (hereafter, PEPs), which have been frequently used as a means of equity financing in the Japanese market in recent years. We find that the discount rate is higher for PEPs issued to the controlling shareholders compared with PEPs issued to others. This empirical result is robust considering several methods of calculating the discount rate of PEPs. Furthermore, we find that discounts of PEPs are more likely to take place in the ex-ante controlling shareholder case than in the ex-post controlling shareholder case. The findings of this paper mainly make three contributions. Firstly, this paper contributes to prior studies and adds to the empirical evidence on the detailed path of tunneling by controlling shareholders. Secondly, this paper contributes to prior studies related to determinants of the price discount of PEPs. Thirdly, this paper contributes to institutional design in practice.

Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23 (4), pp. 589-609.10.1111/j.1540-6261.1968.tb00843.x Search in Google Scholar

Aman, H. (2003). Private placements of equity and the stock market reaction. Review of monetary and financial studies, 19, pp. 56-71. (In Japanese) Search in Google Scholar

Atanasov, V. (2005). How much value can blockholders tunnel? Evidence from the Bulgarian mass privatization auctions. Journal of Financial Economics, 76 (1), pp. 191-234.10.1016/j.jfineco.2004.05.005 Search in Google Scholar

Bae, K.-H., J.-K. Kang, and J.-M. Kim. (2002). Tunneling or value added? Evidence from mergers by korean business groups. The Journal of Finance, 57 (6), pp. 2695-2740.10.1111/1540-6261.00510 Search in Google Scholar

Baek, J.-S., J.-K. Kang, and I. Lee. (2006). Business groups and tunneling: evidence from private securities offerings by korean chaebols. The Journal of Finance, 61 (5), pp. 2415-2449.10.1111/j.1540-6261.2006.01062.x Search in Google Scholar

Barclay, M. J., C. G. Holderness, and D. P. Sheehan. (2007). Private placements and managerial entrenchment. Journal of Corporate Finance, 13 (4), pp. 461-484.10.1016/j.jcorpfin.2007.04.009 Search in Google Scholar

Berle, A., and G. Means. (1932). The modern corporation and private property. New York: Commerce Clearing House. Search in Google Scholar

Bertrand, M., P. Mehta, and S. Mullainathan. (2002). Ferreting out tunneling: an application to indian business groups. The Quarterly Journal of Economics, 117 (1), pp. 121-148.10.1162/003355302753399463 Search in Google Scholar

Chen, A.-S., L.-Y. Cheng, K.-F. Cheng, and S.-W. Chih. (2010). Earnings management, market discounts and the performance of private equity placements. Journal of Banking & Finance, 34 (8), pp. 1922-1932.10.1016/j.jbankfin.2009.12.013 Search in Google Scholar

Cronqvist, H., and M. Nilsson. (2005). The choice between rights offerings and private equity placements. Journal of Financial Economics, 78 (2), pp. 375-407.10.1016/j.jfineco.2004.12.002 Search in Google Scholar

Dyck, A., and L. Zingales. (2004). Private Benefits of Control: An International Comparison. The Journal of Finance, 59 (2), pp. 537-600.10.1111/j.1540-6261.2004.00642.x Search in Google Scholar

Folta, T. B., and J. J. Janney. (2004). Strategic benefits to firms issuing private equity placements. Strategic Management Journal, 25 (3), pp. 223-242.10.1002/smj.373 Search in Google Scholar

Fukuda, A. (2010). An empirical analysis on private placements of common equity in Japan. Kyoto sangyo university essays, social science series, 27, pp. 127-143. (In Japanese) Search in Google Scholar

Hertzel, M., and R. L. Smith. (1993). Market discounts and shareholder gains for placing equity privately. The Journal of Finance, 48 (2), pp. 459-485.10.1111/j.1540-6261.1993.tb04723.x Search in Google Scholar

Hoda, T. (2011). Empirical analysis on private placements of equity in japan. Japan Journal of Finance, 31(2), pp. 20-39. (In Japanese) Search in Google Scholar

Jensen, M. C., and W. H. Meckling. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3 (4), pp. 305-360.10.1016/0304-405X(76)90026-X Search in Google Scholar

Johnson, S., R. La Porta, L.-d.-S. Florencio, and A. Shleifer. (2000). Tunneling. The American Economic Review 90 (2), pp. 22-27.10.1257/aer.90.2.22 Search in Google Scholar

Kato, K., and J. S. Schallheim. (1993). Private equity financings in Japan and corporate grouping (keiretsu). Pacific-Basin Finance Journal, 1 (3), pp. 287-307.10.1016/0927-538X(93)90028-G Search in Google Scholar

Krishnamurthy, S., P. Spindt, V. Subramaniam, and T. Woidtke. (2005). Does investor identity matter in equity issues? Evidence from private placements. Journal of Financial Intermediation, 14 (2), pp. 210-238.10.1016/j.jfi.2004.01.001 Search in Google Scholar

Krishnaswami, S., P. A. Spindt, and V. Subramaniam. (1999). Information asymmetry, monitoring, and the placement structure of corporate debt. Journal of Financial Economics, 51 (3), pp. 407-434.10.1016/S0304-405X(98)00059-2 Search in Google Scholar

La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. (1998). Law and finance. Journal of Political Economy, 106 (6), pp. 1113-1155.10.1086/250042 Search in Google Scholar

La Porta, R., F. Lopez-De-Silanes, and A. Shleifer. (1999). Corporate ownership around the world. The Journal of Finance, 54 (2), pp. 471-517.10.1111/0022-1082.00115 Search in Google Scholar

Liang, H.-C., and W.-Y. Jang. (2013). Information asymmetry and monitoring in equity private placements. The Quarterly Review of Economics and Finance, 53 (4), pp. 460-475.10.1016/j.qref.2013.05.009 Search in Google Scholar

Miyajima, H. (2011). Nihon no kigyo tochi (Corporate governance in Japan). Tokyo: Toyo Keizai Shinposha. (In Japanese) Search in Google Scholar

Morck, R., D. Wolfenzon, and B. Yeung. (2005). Corporate governance, economic entrenchment, and growth. Journal of economic literature, 43 (3), pp. 655-720.10.1257/002205105774431252 Search in Google Scholar

Nenova, T. (2003). The value of corporate voting rights and control: A cross-country analysis. Journal of Financial Economics, 68 (3), pp. 325-351.10.1016/S0304-405X(03)00069-2 Search in Google Scholar

Shishido, Z., K, Nitta., and H, Miyajima. (2010). A Study on the issue of parentsubsidiary listings. Commercial law review, (1900), pp. 35-46. (In Japanese) Search in Google Scholar

Shleifer, A., and R. W. Vishny. (1986). Large shareholders and corporate control. Journal of Political Economy, 94 (3), pp. 461-488.10.1086/261385 Search in Google Scholar

Shleifer, A., and R. W. Vishny. (1997). A survey of corporate governance. The Journal of Finance, 52 (2), pp. 737-783.10.1111/j.1540-6261.1997.tb04820.x Search in Google Scholar

Suzuki, K. (2017). Equity finance in Japan. Tokyo: Chuokeizai-Sha. (In Japanese) Search in Google Scholar

Tan, R. S. K., P. L. Chng, and Y. H. Tong. (2002). Private placements and rights issues in Singapore. Pacific-Basin Finance Journal, 10 (1), pp. 29-54.10.1016/S0927-538X(01)00028-2 Search in Google Scholar

White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48(4), pp. 817-838.10.2307/1912934 Search in Google Scholar

Wruck, K. H. (1989). Equity ownership concentration and firm value: Evidence from private equity financings. Journal of Financial Economics, 23 (1), pp. 3-28.10.1016/0304-405X(89)90003-2 Search in Google Scholar

Wruck, K. H., and Y. Wu. (2009). Relationships, corporate governance, and performance: Evidence from private placements of common stock. Journal of Corporate Finance, 15 (1), pp. 30-47.10.1016/j.jcorpfin.2008.08.010 Search in Google Scholar

Wu, X., and Z. Wang. (2005). Equity financing in a Myers Majluf framework with private benefits of control. Journal of Corporate Finance, 11 (5), pp. 915-945.10.1016/j.jcorpfin.2004.04.001 Search in Google Scholar

Young, M. N., M. W. Peng, D. Ahlstrom, G. D. Bruton, and Y. Jiang. (2008). Corporate governance in emerging economies: A review of the principal principal perspective. Journal of management studies, 45 (1), pp. 196-220.10.1111/j.1467-6486.2007.00752.x Search in Google Scholar

Zingales, L. (1994). The value of the voting right: a study of the milan stock exchange experience. The Review of Financial Studies 7, (1), pp. 125-148.10.1093/rfs/7.1.125 Search in Google Scholar

Empfohlene Artikel von Trend MD

Planen Sie Ihre Fernkonferenz mit Scienceendo