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This article presents the results of a qualitative research project on private domestic and care placement agencies in London. Although there is a paucity of empirical studies on these private actors, they have become increasingly important in the domestic and care sector in the UK. In a context of growing commodification and marketization, the article shows how domestic and care services constitute an extremely profitable ‘industry’ in which large companies are increasingly investing. Drawing on content analysis of agencies' websites and in‐depth interviews with agencies' managers/owners, migrant workers and key informants, the article sheds light on these intermediary figures' marketing and business strategies as well as on the ways they contribute to establish the language and practice of domestic and care work as a business. Furthermore, it highlights the employment conditions and selection criteria established by these private agencies for female migrant workers, particularly in a context in which commodification/marketization is expected to foster more professionalization. The article thus fills a significant gap in the literature on domestic and care work, gender and migration by analysing the ways in which for‐profit recruitment agencies have become important players in the care industry.

Private placements continue to be issued in the municipal debt market and remain a topic of interest for municipalities, investors, and regulators. Private placements are often sold without an underwriter to relatively sophisticated investors and are typically “buy‐to‐hold” transactions. Therefore, compared with traditional competitive or negotiated sales, there are fewer financial intermediaries and fewer regulatory disclosure requirements that accompany private placements. Savings on “flotation” costs can be substantial enough to make private placements a less costly method of debt offering. Conditional on selectivity in the method of sale and key market covariates, private placements offer lower arbitrage yields and issuance costs compared to both competitive and negotiated debt offerings.

Mandatory shareholder approval of equity issuances varies considerably across and within countries. In the United States and a few other countries, management typically needs the approval of only its board of directors to issue common stock. In most countries, however, by law or stock exchange rule, shareholders must vote to approve equity issuances when using certain methods or contemplating offers that exceed a specified fraction of outstanding shares. In some countries, shareholders must approve all equity issuances. Even in the United States, shareholder approval is mandatory under certain circumstances. The differences in the stock market reaction to shareholder‐approved equity issuances and to issues undertaken unilaterally by management are strikingly and consistently large. When shareholders approve stock issuances, whether public or rights offerings, or private placements, the average announcement returns are significantly positive, on the order of 2%. But when managers issue stock without shareholder approval, as in the case of U.S. public offerings, returns are significantly negative and 4% lower, on average, than for shareholder‐approved issues. What's more, the closer in time the shareholder vote is to the issue date, and the greater the required plurality (say, two‐thirds instead of half the vote required for approval), the more positive is the market reaction to the issue—and these findings hold for each of the three main kinds of offerings that take place in all 23 countries in the author's sample. Also telling, in countries where shareholder approval is required, such as Sweden and Malaysia, rights offers predominate over public issues. But in countries like the U.S. and Japan, where managers may generally issue stock without shareholder approval, public offers predominate over rights issues. These findings suggest that agency problems—the tendency of corporate managements to put their own interests before their shareholders'—play a major role in equity issuances. Such findings are also largely inconsistent with the adverse selection, market timing, and signaling explanations that currently dominate academic thinking about equity issuances by public corporations.

We use meta-analysis to review studies on announcement effects associated with seasoned equity offerings. Our sample includes 199 studies from 38 leading finance journals and Social Sciences Research Network working papers. The studies cover different countries, but the US is particularly wellrepresented with 131 studies. We find a statistically significant mean cumulative abnormal return of −0.98%. Abnormal returns are more negative for equity issues by US companies and for non-US rights issues and are less negative for private placements. In addition, wealth effects are more negative when the proceeds are used for debt reduction, when the SEO is issued shortly after IPO, and for issues by nondividend-paying companies and industrial companies. We identify important avenues for future research.

This paper examines the impact of insider trading on the completed and canceled private equity offerings. We find that insider trading has no impact on firms’ decisions to complete or cancel the offerings, but it has a positive impact on the long-run stock performance of the issuing firms. Firms complete the undervalued offerings and cancel the offerings when they no longer perceive their shares are undervalued. Firms with weaker operating performance are more likely to complete the private placements because they regard private offering as the last resort for raising equity capital. Firms that complete private placements have significantly better long-term stock performance than firms that cancel private placements.

In this study, we examine the effectiveness of corporate governance in mitigating dilution in the economic and voting interests of existing nonparticipating (retail) shareholders in private placements. Based on a sample of 2420 private placements in Australia from 2001 to 2012, we find support for this proposition through the influence of corporate governance on pricing negotiation and firms’ choice of issuing method in private placements. Specifically, firms with better corporate governance offer private placements with a smaller discount, and are more likely to include a share purchase plan, which protects nonparticipating shareholders from ownership dilution in the placement.

We examine the role of institutional investors in the voting process by analyzing the changes in the equity lending market around the time of a vote. Using a comprehensive proprietary data set, we find a marked reduction in the supply of lendable shares around the time of a vote because institutions restrict or call back their loaned shares prior to a vote. The reduction in the supply of lendable shares is most pronounced in cases for which ISS recommends voting against the proposal. Examining the subsequent vote outcome, we find that a recall in lending supply is associated with greater votes cast against both management and material proposals. There are also fewer favorable votes cast if ISS opposes management, and for firms with larger institutional ownership. Our results imply that institutions are willing to give up revenue from lending securities in order to exercise voting rights. To address concerns related to empty voting, we also examine changes in borrowing demand around the time of a vote. There is some evidence of increased demand around the time of the record date. However, we find no relation between voting outcome and borrowing demand at the record date. Our results indicate both that corporate governance is important to institutional investors and that the proxy process is an important channel for corporate governance.

This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets.

We analyze the stock and operating performance of firms issuing private placements in Taiwan. Issuing firms have poor pre-issue performance and earn significantly positive returns at announcement. Placements with an owner-manager or with nonexecutive directors are associated with better post-issue stock and operating performance, suggesting that an increase in insiders' stakes leads to better alignment of managerial incentives and an increase in monitoring by insiders. In contrast, placements made to outside investors are unlikely to turn around the issuing firms. [ABSTRACT FROM AUTHOR]

The literature contains four explanations for the private placement discount. I find that all four contribute to the discount: loss of option value due to transfer restrictions, equity ownership con-centration, information gathering, and overvaluation and expected underperformance post-issue. An average-strike put option model calculates marketability discounts that are consistent with empirical private placement discounts when observed discounts are adjusted for equity ownership concentration, information, and overvaluation effects. In contrast to the positive signaling effect of traditional private placement announcements, there is a negative signaling effect for private investments in public equity when the firm commits to register the shares promptly. [ABSTRACT FROM AUTHOR]

The price discount on privately placed stock is large and can vary substantially among firms. While earlier studies attribute price discounts on privately placed stock to illiquidity and costs of gathering information, we offer a more complete explanation. We find that firms exhibiting higher overvaluation have significantly larger price discounts in private stock sales. We also find that higher levels of asymmetric information about the issuing firm and about the stock market environment at the time of the private placement cause more pronounced discounts in the offer price. Our analysis also shows that post-issue abnormal returns following private placements are higher when discounts are less pronounced.

We explore the role of placement agents in equity private placements. Reputable agents are more likely to place shares of firms that have performed better and that have had frequent prior relationships with the agent. Controlling for self-selection and endogeneity, firms using reputable agents offer smaller price discounts. However, issuers having frequent prior relationships with placement agents incur higher gross spreads. Although the results support the certification role of investment banks in private placements, they also shed light on the costs incurred by issuers that frequently rely on the same investment bank.

We propose the corporate governance hypothesis which suggests that the outside blockholders arising from the private placement of equity are more likely to have a significantly positive effect on firms with poor corporate governance. Using a sample of Taiwan-listed firms with initial private placements of equity, our study’s results indicate that an improvement in operating performance is more likely to be seen after a private placement for those firms that are without independent directors, are controlled by a family, have lower insider shareholdings or are characterized by a pyramidal ownership structure. These findings are consistent with our hypothesis.

European stock exchanges have repeatedly opened second markets to list small companies. We explain the motivation for the creation of these second markets, and the reasons why many of them have failed. We find that the average long-run performance of initial public offerings (IPOs) on second markets is dramatically worse than for main market IPOs. However, the second markets have provided firms with the opportunity to raise funds at the IPO and in follow-on offerings. The relative success of London’s AIM, which is an exchange-regulated market with minimal regulations, has led other European stock exchanges to establish similar non-EU regulated second markets. Most of the IPOs on these exchange-regulated markets are offered exclusively to institutional investors, and are equivalent to private placements. These IPOs, which frequently raise only a few million euros, rarely develop liquid trading.

Data from restricted-stock studies are routinely used by business-valuation analysts and small-business appraisers to estimate discounts for lack of marketability, or DLOMs, which are then applied in the valuation of private companies. The rationale for the use of such DLOMs is that, even after an investor is compensated for the risk associated with holding an asset, an asset held unwillingly (due to illiquidity) must be worth less than if the asset were held by choice. But the same rationale can also be applied to the DLOM on riskless assets (such as Treasuries), and the evidence is consistent with a DLOM on such assets of only about 2.5%. This in turn suggests that any DLOM larger than 2.5% amounts to a second round of discounting for risk (where the first round occurs in a DCF or similar core valuation). Discounting with conventionally measured DLOMs is likely to be redundant because liquidity or marketability is highly correlated with company size, and size is already an important determinant of discount rates. Existing evidence suggests that, before DLOMs are applied, real-world valuations of small businesses typically include discounts of as much as 50% for lack of size. And given that restricted-stock studies are routinely used to support DLOMs of 20% to 40%, the valuation discounts resulting from this procedure are likely to be much too large. In contrast to industry practice, the author's study of a large sample of private placements of equity produces evidence consistent with use of a DLOM no greater than 5% or 6%.

We analyze the economic consequences of disclosure and regulation within a context of significant information asymmetry and lenient regulation. In Canada, firms can enter the stock market at a prerevenue stage by fulfilling each of the requirements of an initial public offering or using reverse mergers. This backdoor listing method implies a smoother oversight by the securities commission and a shorter process based on private placements. Controlling for several dimensions, including self-selection, we find that the choice of the listing method and regulation strictness significantly influence the value and long-run performance of newly listed firms. These results are consistent with theories suggesting that a commitment by a firm to a stricter regulatory oversight lowers the information asymmetry component of the cost of capital, reducing the heterogeneity of expectations and mispricing.

We study the effect of campaign contributions to lead plaintiffs—“pay to play”—on the level of attorney fees in securities class actions. We find that state pension funds generally pay lower attorney fees when they serve as lead plaintiffs in securities class actions than do individual investors serving in that capacity, and larger funds negotiate for lower fees. This differential disappears, however, when we control for campaign contributions made to officials with influence over state pension funds. This effect is most pronounced when we focus on state pension funds that receive the largest campaign contributions and that associate repeatedly as lead plaintiff with a single plaintiff's attorney firm. Thus, pay to play appears to increase agency costs borne by shareholders in securities class actions, undermining one of Congress's principal goals in adopting the Private Securities Litigation Reform Act.

In this study we examine the underpricing of initial public offerings (IPOs) by firms that have private placements of equity before their IPOs (PP IPO firms). We find that PPIPOsareassociatedwithsignificantlylessunderpricingthantheirpeers.Furthermore, PP IPOs are associated with lower underwriting spreads, more reputable underwriting syndicates, and greater postissue analyst coverage as compared to IPOs that are issued by their industry peers under similar market conditions. Consistent with the implications of the information asymmetry explanation for IPO underpricing, our findings suggest that companies could benefit by conveying their quality via successful pre-IPO private placements that help reduce the cost of going public.

Recently, the US Securities and Exchange Commission reduced resale restrictions on Rule 144 private placements from 12 months to 6 months with the intention of lowering the cost of equity capital for issuing firms. In Canada, similar regulatory changes were adopted several years ago, providing a unique opportunity to test the wealth effects of reducing private placement resale restrictions. We find that shortening resale restrictions reduces the liquidity portion of offer price discounts, and thus lowers the cost of equity capital for issuing firms, but has no significant effect on announcement-period abnormal returns after controlling for issuer type. However, there is a fundamental shift in the types of firms making private placements of common stock after the legislation-induced easing of resale restrictions. Specifically, we find that smaller firms and firms with greater information asymmetry are less likely to issue privately placed common stock after the legislative change, suggesting that the easing of resale restrictions reduces the costly signal that helps to overcome the Myers and Majluf (1984) underinvestment problem.

Building on the models of Benveniste & Spindt (1989) and Maksimovic & Pichler (2006), the present paper examines the optimal pricing and allocation mechanism for private placements of equity. Our model shows that for firms that receive favorable information prior to private placements, both the information acquisition cost and the value of information affect the offer discount. However, for firms that receive unfavorable information, only the information acquisition cost is the driving force behind the discount. We also show that the value of information has a greater impact on the discount level in private offerings compared to public offerings. However, the information acquisition cost has a greater effect on the discount in public offerings than in private placements.

We examine the market impact of issuances of public and private debt by firms with sizeable tax loss carryforwards (TLCFs). Public issuances are met with a significantly negative stock price reaction, while private placements are associated with a positive marginally significant stock price reaction. After controlling for asymmetric information proxies, the stock price reaction to the debt issuance is more negative, the larger the TLCF. The evidence suggests that debt financing is suboptimal when issuers have large TLCFs, which in turn, supports the relevance of taxes for debt usage.

This study examines long-run stock returns, operating performance and abnormal accruals of private placements of convertible securities. We investigate the effects surrounding private placements to test and differentiate the implications of several competing hypotheses. While the monitoring and certification hypotheses suggest positive effects, the managerial entrenchment, overvaluation and windows-of-opportunity hypotheses suggest the opposite. We find that placing firms generally experience positive effects in the pre-periods and negative effects in the post-periods. Our overall findings are more consistent with the predictions of the overvaluation and windows-of-opportunity hypotheses while our post-placement evidence is also consistent with the predictions of the managerial entrenchment hypothesis.

Private placements of straight nonbank debt by publicly traded firms elicit a positive stock price reaction on average, consistent with a market perception that they confer significant certification and monitoring benefits on borrowers. However, long-run stock returns following the debt issues are significantly lower than benchmarks. Our results are consistent with the view that firms issue private debt prior to a decline in operating performance, and they disclose overly optimistic information in the pre-issue period which prevents information on the upcoming downturn from reaching the market in a timely manner. Lenders have private information on the post-issue performance decline prior to their lending decision, and take steps to protect their investment which do not benefit equity investors. Our results are inconsistent with certification and monitoring benefits accruing to equity investors from private nonbank debt.

Basket securities enable investors to purchase a broad portfolio of securities in a single transaction. We examine the link between HOLDRS, a basket security comprising stocks from an industry or sector, and the underlying stocks. We find that the price of the portfolio of underlying securities leads and is more informative than the basket price. Our results are contrary to the findings of empirical studies that use futures, which are basket securities with features less like those of the underlying equities. Our findings suggest uninformed investors can minimize adverse selection costs by trading basket securities rather than the underlying stocks.

This paper extends the analysis of Rashes (2001) to examine the co-movement of prices for a sample of UK equity securities with similar ticker symbols and names. In contrast to Rashes (2001), we find only limited evidence of price changes that could be attributed to ticker symbol or name confusion. Our results suggest that any such confusion, if it exists at all, is most likely confined to very short time horizons and is not a systematic occurrence for similarly identified securities.

The large and increasing presence of institutional investors both as owners of public companies and as traders in the U.S. stock markets has important implications for both firms' decisions and stock price behavior. Much academic research in accounting and finance has been conducted to understand these implications. The main questions addressed in the literature typically fall into one of four categories. (1) Whether and how institutional ownership affects firms' behaviors. This includes research analyzing the relation between institutional ownership and a variety of firms' decisions such as investment, financing, corporate governance and financial reporting choices. (2) Whether institutional investors achieve high enough returns to justify their costs. This includes research evaluating the performance of institutions such as actively managed mutual funds and hedge funds whose primary goal is to maximize (net-of-fee) returns. (3) Whether and how institutional investors' trading affects stock price behavior, such as stock price volatility and stock market liquidity. (4) Whether and how institutional investors improve stock price efficiency. The research question entertained in Bushee and Goodman (hereafter, BG): "Which institutional investors trade based on private information?" is

We examine private equity with warrant (unit) placements and compare them with private equity placements. Firms making unit placements are smaller, younger, riskier, and characterized by higher information asymmetry than equity-placing firms. Furthermore, unit-placing firms experience good pre-placement stock performance; however, their post-placement performance is poor and worse than that of equity-placing firms. We also find that very few of the placed warrants are in the money at expiration. Our results are consistent with the window of opportunity hypothesis and the theory that warrants are especially desirable to a clientele of overoptimistic investors.

In 1997, the U.S. Treasury introduced Inflation Protection (or "Indexed ") Securities, known as TIPS. Several authors have since described these securities as "tax disadvantaged" relative to conventional securities, leading to substantial debate regarding their appropriateness outside of tax-deferred accounts. In this paper, the authors develop a framework that allows them to demonstrate that the tax treatment of TIPS is trivially different from that of conventional Treasury securities. Utilizing an after-tax valuation approach, they further show that under relatively conservative projections for inflation, TIPS generally have after-tax yields comparable to, if not exceeding, conventional fixed-rate Treasury securities. Moreover, the authors find evidence that since their introduction, TIPS have outperformed matched maturity conventional Treasury securities in terms of after-tax returns. JEL classification: G0, G1, H2, H6 Key words: Treasury securities, inflation protection, income taxes, interest rates In January 1997 the U.S. Treasury followed the lead of several other countries and began auctioning inflation-indexed debt in the form of Treasury Inflation Protection (or "Indexed") Securities, commonly referred to as TIPS. Unlike the Treasury's conventional debt, these indexed debt securities have a fixed real coupon rate. Because the principal is adjusted (semiannually) by the amount of inflation over the period, nominal coupon payments, equal to the product of the real coupon rate and the inflation-adjusted principal, grow with inflation. By design, these securities provide a hedge against inflation, and the real yield (equal to the real coupon rate) is essentially constant and established at issuance. The finance profession has alternated between totally ignoring the tax treatment of these new instruments on the one hand to arguing that the tax treatment of these instruments is so unique and disadvantageous to make these unworthy of taxable investors attention. A number of studies demonstrate that inflation-indexed debt can be a beneficial component of most portfolios (e.g., Bodie [1990], Campbell and Viceira [2002], and Campbell et al. [2003]). Without considering the tax treatment of these instruments these studies imply that TIPS do not have any unique tax considerations. Similarly, Jarrow and Yildirim [2003] use an arbitrage-free term structure model to fit the time series of real and nominal zero-coupon bond prices, without a tax factor. This again suggests that these authors see little in the tax treatment of TIPS to make them different from nominal Treasury securities. Others, however, emphasize the unique tax treatment placed upon TIPS as critical in interpreting these instruments. (1) Essentially, taxes must be paid annually on accrued increase in principal caused by inflation, even when this is an unrealized gain. Therefore, the owner is required to pay taxes on "phantom income" that is not actually received until maturity or upon sale of the bond. This tax treatment has led several leading authorities in the field to characterize TIPS as "tax disadvantaged." See, for example, Fabozzi [2000], Van Horne [2001], and Sundaresan [2002] who all argue that TIPS have serious tax disadvantages. (2) The conclusion that TIPS are seriously tax disadvantaged has spilled into the popular press as well. For example, in a recent issue of Money magazine, Rekenthaler [2003, p.44] writes.[The tax treatment] is annoying ... therefore, TIPS are best held in a tax-deferred account." Clements [2003], in the Wall Street Journal, quotes an investment advisor, Nelson Lam, as stating, "These things [TIPS] are horribly tax inefficient." In this paper, we evaluate the notion that TIPS are tax disadvantaged. We argue that the tax treatment of TIPS needs to be compared with the tax treatment of non-inflation indexed securities, rather than in isolation. Our analysis suggests that, under fairly common assumptions, these instruments are not tax disadvantaged relative to conventional Treasury debt. …

We examine the relation between pre-SEO announcement date misvaluation and long-run post-SEO performance for a large sample of Australian seasoned equity offerings (SEO) made between 1993 and 2001. Our study is motivated by inconsistent findings across countries with respect to the SEO long-run underperformance anomaly first documented in the US, inconclusive findings with respect to the hypothesis that managers exploit market misvaluation when timing equity issues, and a recent Australian Stock Exchange proposal to loosen SEO regulation. We find SEO firms underperform common share market benchmarks for up to five years after the announcement. Using a residual income valuation method, we show this underperformance is related to pre-announcement date misvaluation. An unexpected result is that underperformance and misvaluation are more severe for private placements than rights issues. Institutional factors unique to the Australian setting, particularly the large number of smaller loss-making firms among private placement issuers, appear to explain the poorer performance of placement firms. Our results are robust to various measurement methods and assumptions, and demonstrate the importance of researching SEO performance in alternative institutional settings.

We examine the determinants of underwriter spreads on straight/fixed rate Eurobonds issued by U.S. firms between 1990 and 1998. We find that underwriter spreads are influenced by: (i) the governing law as it influences the timely and orderly renegotiation of contract terms, with bonds governed by English law having significantly lower spreads; (ii) the distribution mechanism, with spreads higher on public issues than private placements; (iii) underwriter reputation, with more reputable underwriters charging higher fees; and (iv) the choice of currency, with spreads higher in the less frequently utilized currencies and/or in currencies where underwriting activities are more concentrated.

For young technology firms, acquiring resources can often be costly due to the information asymmetry and uncertainty that exist surrounding the new technology. We contend that firms able to issue private equity can better manage their ability to mobilize three kinds of resources: capital, research partners, and commercial partners. We investigate the existence of long-term, strategic benefits to private placements, and a number of factors may determine the long-term effectiveness of this governance form. Overall, the empirical analyses demonstrates that private placements provide long-term benefits to firms by reducing hazards associated with information asymmetry. Copyright © 2003 John Wiley & Sons, Ltd.

The Gramm–Leach–Bliley Act (GLB) repealed many of the Glass–Steagall restrictions separating commercial and investment banking. We explore whether the ability of commercial banking organizations to conduct securities underwriting has lead to greater small-business lending at banks with securities affiliates. We hypothesize that this effect on small-business lending might emerge from greater incentives to engage in relationship lending. Our test results are inconsistent with this hypothesis. Banks with a securities affiliate and with less than $1 billion in assets record lower portfolio proportions of small-business lending than banks without a securities affiliate. For larger banks, the differences between small-business lending proportions at banks with and without a securities affiliate are not statistically different when considering the smaller loan categories. Large banks with securities affiliates, though, record significantly lower portfolio proportions of both the largest category of small-business loans and total small-business loans.

This paper uses a real options approach to establish a new evaluation model under uncertainty of both the volume of Internet securities transactions and the total transaction volume of a securities firm. The proposed approach can assist securities firms in evaluating the optimal thresholds for entering the Internet securities trading business and withdrawing from the conventional securities trading business. This paper assumes that the annual number of Internet securities transactions and the total annual number of securities transactions both follow a geometric Brownian motion. Besides, this model considers a start-up time to complete the entry project's procedure. Accordingly, a decision model based on the real options approach is introduced, and the closed form solutions for the optimal threshold values of the entry or withdrawal models are determined. The conclusions provide some valuable references to help strategic managers of securities firms in making decisions on entering the Internet securities trading business or withdrawing from the conventional trading business.

Public firms that place equity privately experience positive announcements effects, with negative post-announcement stock-price performance. This finding is inconsistent with the underreaction hypothesis. Instead, it suggests that investors are overoptimistic about the prospects of firms issuing equity, regardless of the method of issuance. Further, in contrast to public offerings, private issues follow periods of relatively poor operating performance. Thus, investor overoptimism at the time of private issues is not due to the behavioral tendency to overweight recent experience at the expense of long-term averages.

We examine institutional characteristics and the wealth effects of private equity placements in Singapore. Our findings show that private placements in Singapore generally result in a negative wealth effect and a reduction in ownership concentration. We find that at high levels of ownership concentration, the relation between abnormal returns and changes in ownership concentration is significantly negative. We also show that the market reacts less favorably to placements in which management ownership falls below 50%, but more favorably to issues to single investors. We do not find evidence suggesting that our results are due to an information effect.