Firm Performance after Allocation of newly issued Private Placement among Thai Listed Firms

Abstract

The objective of this study is to study the performance of listed companies after the allocation of newly issued equity to specific investors using private placement (PP) method. The study compares the companies that raised capital by PP method with their counterparts listed on the SET and mai during 2007-2013. The results reveal that those companies allocating shares using PP method have stronger market value and higher rate of return on equity in one year before the specific sale of shares. The advantages have gradually declined since the PP allocation year. On the contrary, companies that allocate PP shares have decreased their debt-to-equity ratio in one year before the shares are sold. The incidences have gradually increased since the year of PP allocation. The results also suggest that the rate of return that abnormal returns of the company that allocated PP shares have decreased, starting from 1 year after the share sale until 2 years after the share sale. The multiple regression analysis reveals that abnormal returns from buying and holding shares after one year of disposition is significantly dependent on equity returns of the year before shares disposals.