Why Do Public Firms Issue Private and Public Securities?

By Armando Gomes, Gordon M. Phillips. Social Science Research Network, 2012

214 citations recorded by the source corpus.

The market for public firms issuing private equity, debt, and convertible securities is large. Of the over 13,000 issues we examine, more than half are in the private market. Our results show asymmetric information plays a major role in the choice of security type within public and private markets and in the choice of market in which to issue securities. In the public market, firms’ predicted probability of issuing equity declines and issuing debt increases with measures of asymmetric information. There is a weak reversal of this sensitivity in the private market. We also find a large sensitivity of the choice of public versus private markets to asymmetric information, risk and market timing for debt, convertibles, and in particular, equity issues.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/06709e439f6e43faf2d90c37ec422b3c9a2879d5

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Citations in the corpus

Executive Compensation and Capital Structure: The Effects of Convertible Debt and Straight Debt on CEO Pay (2007, background): “(1998, 1999), Krishnaswami and Yamar (2004), and Gomez and Phillips (2005).”
Does Asymmetric Information Drive Capital Structure Decisions (2009, unknown): “... 1991), recent asset volatility (Halov and Heider 2004), RD Gomes and ...”
Trade-Off and Pecking Order Theories of Debt (2007, background): “Gomes and Phillips (2005) find that half the equity issues are in the public market while half are private issues.”
Industry Concentration and Corporate Disclosure Policy (2014, background): “Wu (2004) and Gomes and Phillips (2012) show that firms with greater information asymmetry are more likely to sell new shares via a private placement rather than through a seasoned equity offering.”