Private Placement of Common Equity and Earnings Expectations
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.
equity offerings, private placements, earnings forecast, information signalling
Business | Corporate Finance | Portfolio and Security Analysis
GOH, Jeremy C.; Gombola, Michael; LEE, Hai-Wei; and LIU, Feng-Ying.
Private Placement of Common Equity and Earnings Expectations. (1999). Financial Review. 34, (3), 19-32. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/2201