Abstract
While considerable attention has been paid to market reaction announcements of public equity issues, only a small amount of research has been devoted to their private placement counterparts. This is surprising given that proceeds from the latter are typically used to finance firms’ new investment projects. This paper helps to redress the balance, by applying market model methodology to 78 private equity issue announcements in the UK over the period 1990-1995. Private placement announcements appear to be associated with positive abnormal returns. It is hypothesised that these arise from the unique negotiating structure between management and private clients.
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