The choice between publicly issued and privately placed preferred stocks
Abstract
Purpose
The purpose of this paper is to empirically test information asymmetry and agency conflicts hypotheses, as to firm's choices in selling preferred stock in public and private markets.
Design/methodology/approach
Using firm‐level preferred stock issue data, the author uses a multivariate logistic model to see a firm's different preferred stock selling decisions among public market, rule 144A market, and non rule 144A market. The paper examines the impact of the firm's idiosyncratic risk and cash flow volatility.
Findings
It is found that private placement (non rule 144A) firms have higher information asymmetry than public offering firms. In addition, private placement (rule 144A) firms have higher operating risk than public offering firms. The non Rule 144A market and rule 144A market for preferred stocks are significantly different.
Research limitations/implications
This topic can be further studied with more detailed, preferred stock issue data.
Originality/value
The paper extends our understanding of the preferred stock market selling mechanism.
Keywords
Citation
Wang, Q. (2012), "The choice between publicly issued and privately placed preferred stocks", Managerial Finance, Vol. 38 No. 7, pp. 689-701. https://doi.org/10.1108/03074351211233140
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited