Private placements on the Oslo Stock Exchange : an event study on the market reaction to private placements in the time period from 01.01.2004 to 31.12.2010

Abstract

This thesis examines the share price reaction to private placements with cash settlements on the Oslo Stock Exchange in the time period from January 1st 2004 to December 31st 2010. A significant negative average abnormal return is observed on the announcement day. This market reaction is primarily explained by dilution to current shareholders from private placement discounts. The sample shows evidence of a significant run-up in the year before the private placement, and a significant negative share price development in the years after the private placement. The results contradict both the monitoring hypothesis and the certification hypothesis, and offers support to alternative hypotheses, such as managerial entrenchment and timing.