Private Placement of Common Equity and Earnings Expectations

• Main Authors: GOH, Jeremy C., Gombola, Michael, LEE, Hai Wei, LIU, Feng Ying
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1999
• Subjects: equity offerings; private placements; earnings forecast; information signalling; Business; Corporate Finance; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2201; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3200/viewcontent/j.1540_6288.1999.tb00460.x.pdf
• Institution: Singapore Management University

Earnings forecast revisions by analysts subsequent to the announcement of private equity placements are examined. Results show that analysts make significant upward revisions to their forecasts for current-year earnings. Furthermore, these forecast revisions are significantly related to announcement-period abnormal returns, but not to the risk changes accompanying the equity placement. These findings are consistent with the information hypothesis, which suggests that private equity placements convey favorable information about future earnings.