Title: Wealth effects of private placements: evidence from Indonesia

Authors: Yane Chandera; Lukas Setia-Atmaja

Addresses: School of Business and Economics, Universitas Prasetiya Mulya, Jakarta, Indonesia ' School of Business and Economics, Universitas Prasetiya Mulya, Jakarta, Indonesia

Abstract: This study examines the wealth effects of private placements undertaken by Indonesian publicly listed firms. It also determines the factors that affect the wealth creation based on two underlying hypotheses: asymmetric information and monitoring hypotheses. All private placements data of Indonesian publicly listed firms from 1996 to 2013 are used in this study. Wealth effects are measured using an event study methodology while cross-sectional regression analyses with White's heteroskedasticity-corrected standard errors are conducted to evaluate the main determinants of the observed abnormal returns. This study finds that private placements create value to the issuing firms, and are generally induced by the mitigation of asymmetric information problems rather than by the increase of ownership concentration. Therefore, this study is able to prove asymmetric information hypothesis but fails to support the monitoring hypothesis. This result is consistent with similar studies on other Asian firms which generally have high ownership concentration.

Keywords: private equity placements; PEPs; information asymmetry; monitoring hypothesis; Asia; Indonesia; event study; ownership concentration; wealth effects; private placements; abnormal returns.

DOI: 10.1504/IJAF.2016.079094

International Journal of Accounting and Finance, 2016 Vol.6 No.2, pp.145 - 165

Received: 31 Jan 2015
Accepted: 03 Apr 2016
Published online: 12 Sep 2016 *

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