آیا هماهنگی سهامداران مهم است ؟ مدارک و شواهد از کارگماری خصوصی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|23264||2013||18 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Economics, Volume 108, Issue 1, April 2013, Pages 213–230
We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.
Private investments in public equity (PIPEs) involve the unregistered sale of publicly traded securities such as common or preferred stock and convertibles to a small group of sophisticated private investors. Despite their more complex contract structure, frequently including reset provisions and warrants, PIPEs have become an increasingly important means of raising equity for troubled firms with limited access to the public equity market. As a result, the share of private placements in secondary equity issuance has increased from 4% in 1995 to 27% in 2007.1 One of the most puzzling features of private equity placements is their positive announcement return. For example, the (−3, 1) cumulative average daily return during 1995–2007 is 2.12%. This positive price reaction contrasts with the negative announcement returns of secondary equity offerings (SEOs) and implies that PIPEs are viewed by the market as beneficial to existing shareholders. This is even more surprising considering that the average private equity placement is offered at a large discount to current market prices (13% in our sample period) and results in significant dilution of the holdings of incumbent equity holders (30% on average in 1995–2007).2 The existing literature has provided several competing interpretations of the positive announcement effect of PIPEs. Wruck (1989) establishes a relation between the market's positive reaction to private placements and the increase in ownership concentration following PIPE issuance. She interprets the positive price effect of PIPEs as evidence that changes in ownership concentration better align the interests of managers and shareholders. Hertzel and Smith (1993) consider the role of private placements in resolving asymmetric information problems about firm value. They view a private issue as a seal of approval by sophisticated institutional investors on the current valuation of a firm.3 Typical PIPE issuers are troubled firms with more dispersed shareholders and more concentrated debtholders than the average firm. Building on the Wruck (1989) contribution, this paper argues that PIPE issuance allows dispersed equity holders to concentrate their control rights by bringing in a new blockholder with a large incentive to improve firm value. However, unlike the Wruck (1989) emphasis on improved monitoring reducing agency conflicts within the firm, we focus on an alternative channel whereby private placements serve as a mechanism to mitigate coordination frictions among existing equity holders in their choice of firm policy. A distressed firm is likely to experience a shift of control rights from equity to debt, in which case any change in existing firm policy could require negotiations between equity holders and debtholders. We claim that PIPE issuance improves the coordination ability of equity holders and facilitates negotiations of firm policy with debtholders. We focus on debt renegotiation as a specific example of a major policy, which benefits from improved ability of a firm's stakeholders to come to an agreement.4 Debt renegotiations are especially important for private placement firms because of their high level of distress and reduced ability to access public markets. Two main contributions of this paper deserve attention. First, we use instrumental variables (IV) analysis to establish a causal link between the coordination ability of incumbent equity owners and PIPE issuance. This result obtains even after propensity score matching on alternative explanations of private equity issuance. Second, we show the effect of the coordination channel on a firm's post-issuance debt renegotiation and default likelihood. Reduced coordination frictions among shareholders following PIPE issuance substantially decrease the odds of default of PIPE firms compared with matched controls. PIPE issuers are also more likely to experience favorable debt renegotiations resulting in lower interest spreads and larger loan principals within one year of issuance. Our empirical approach aims to differentiate the coordination channel proposed in this paper from the information asymmetry and monitoring hypotheses in the existing literature. Ideally, we would be able to conduct a randomized experiment in which firms with different coordination ability of incumbent equity holders are randomly chosen to issue equity in the secondary public market (SEO) or to private investors (PIPE). In the absence of such randomization, we need to effectively control for the potential selection bias resulting from the effect of firm characteristics (such as information asymmetry, access to public markets, and distress) on the choice of equity financing. We use propensity score matching techniques to reduce the confounding effects of firm attributes on the mode of equity issuance. We look for conditioning variables among the firm characteristics suggested by alternative explanations of private equity issuance. Specifically, we compare each PIPE issuer to its SEO counterparts in terms of pretreatment differences in information asymmetry, access to public markets, and predicted default probability. Our propensity score analysis corrects for selection bias in terms of observable characteristics that could affect the decision to issue private equity. We also use instrumental variables analysis to address potential self-selection concerns in terms of unobservable firm heterogeneity. Our measure for shareholder concentration directly reflects the level of coordination necessary to reach a decision based on shareholder voting. We use a firm's total Shapley value to proxy for existing coordination frictions among incumbent equity holders. The Shapley value captures the relative importance of each voting shareholder in terms of her expected ability to have a pivotal vote in changing firm policy.5 A low Shapley value of current shareholders suggests larger coordination benefits from adding a PIPE investor. Our univariate results show that PIPE issuers have 51% lower Shapley values of incumbent equity than their non-PIPE counterparts. To account for the pre-issuance balance of power between equity holders and debtholders, we also measure a firm's concentration of public debt claimants by the Herfindahl Index of its bond issues. This proxy captures the distribution of par values of outstanding bonds. A higher bond Herfindahl Index indicates more concentrated bondholders, which increases the benefit of improving the coordination ability of a firm's equity holders. We observe that PIPE firms have 33% more concentrated bondholders than SEO firms. Our first set of results shows that both the coordination ability of a firm's incumbent equity holders (measured by their Shapley value) and the concentration of its public debtholders (proxied by the bond Herfindahl Index) are highly statistically significant in predicting PIPE issuance. Using a comprehensive US sample of private equity placements and secondary equity offerings between 1995 and 2007, we show that a firm experiences a 38% increase in the odds of a private placement with a one standard deviation decrease in the coordination ability of its shareholders. In addition, we observe a 20% increase in the odds of a private placement with a one standard deviation increase in the concentration of a firm's debtholders. Using the initial-year industry Shapley value as an instrument for the firm-specific Shapley value of an issuer, we establish a causal relation between a firm's equity holder coordination and PIPE issuance. This causal link remains significant even after propensity score matching on other determinants of the choice of external financing such as information asymmetry and access to public markets. Our results demonstrate that the coordination mechanism plays an important role in explaining the choice to issue private equity. How do current shareholders and new PIPE investors share the surplus realized by coordination improvement? We find that a one standard deviation increase in the Shapley value of incumbent equity holders decreases the discount offered to PIPE investors by 14%. This result implies a statistically and economically significant relation between the benefits of reducing equity coordination costs and the discount that new PIPE investors receive. We also show that high bond concentration increases the gains from improved equity coordination. Firms with above-median bond concentration have 6% higher PIPE discounts compared with firms with below-median bond concentration. These additional tests provide compelling evidence in support of the coordination hypothesis we propose in this paper. Our second set of results demonstrates that private equity issuance is highly significant in predicting a reduced likelihood of default even after propensity score matching on the typical determinants of default as well as information asymmetry and amount of capital infusion. We instrument PIPE issuance by our two coordination proxies (Shapley value and bond Herfindahl Index) and find that a one standard deviation increase in predicted PIPE decreases the odds of default in half. In fact, PIPE issuance has higher economic significance than any of the common bankruptcy predictors including Z-score. To provide direct evidence that PIPE firms improve their financial health post-issuance, we examine whether private placements facilitate debt renegotiation in practice. We use difference-in-differences analysis to estimate the probability of favorable debt renegotiation within one year of PIPE issuance. Compared with firms matched on size, equity coordination, and distress, PIPE firms participate in fewer loan amendments following issuance but achieve a 40% higher incidence of favorable outcomes such as lower interest spreads and larger principals. Our empirical results provide strong evidence that improved equity coordination after PIPE issuance raises a firm's likelihood of a favorable debt modification. The rest of the paper proceeds as follows. Section 2 describes the data and introduces our coordination proxies as well as our main controls. Section 3 reviews the empirical evidence supporting the coordination hypothesis. Section 4 relates private placements to reduced default and favorable debt renegotiation. Section 5 discusses robustness tests. Section 6 concludes.
نتیجه گیری انگلیسی
In this paper, we study the circumstances in which a private investment in public equity is an attractive strategy for a firm. We argue that private equity issues improve the coordination ability of equity holders and facilitate negotiation of firm policies with debtholders. We demonstrate that the option to issue equity privately is more valuable for firms with a dispersed shareholder base and concentrated public debt. Using a comprehensive data set of PIPE transactions in the United States between 1995 and 2007, we establish a strong causal link between the coordination ability of incumbent equity owners and PIPE issuance. This result obtains even after propensity score matching on the alternative explanations of private equity issuance in the existing literature. In addition, we find that the PIPE discount is directly proportional to the coordination gains expected by incumbent shareholders following the addition of new PIPE investors. We also show the effect of the coordination channel on a firm's post-issuance debt renegotiation and default likelihood. PIPE issuance is highly significant in predicting a reduced likelihood of default. Controlling for the typical determinants of default, we find that a one standard deviation increase in predicted PIPE decreases the odds of default in half. We also provide direct evidence of favorable debt renegotiations within one year of issuance resulting in lower interest spreads and larger loan principals. We conclude that private placements facilitate coordination of policy decisions between the shareholders and bondholders of financially distressed firms and reduce their likelihood of default.