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Private placements on the Oslo stock exchange : an empirical study of the short- and long-term stock performance following private placements during the time period 2000 to 2019

Bærvahr, Peder N.; Finstad, Lars Marcus
Master thesis
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URI
https://hdl.handle.net/11250/2679929
Date
2020
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  • Master Thesis [3258]
Abstract
This thesis examines the short- and long-term performance of firms issuing equity

privately on the Oslo Stock Exchange (OSE). By investigating an unexamined time

period, this thesis adds new evidence to the existing literature of private

placements. Contrary to former research, our results show a statistically significant

negative stock price reaction to a private placement announcement. Previous

literature explains the stock price reaction to a private placement announcement

with the monitoring-, certification- or the management entrenchment hypothesis.

These theories seem to be less relevant for justifying the stock price behavior of

firms utilizing private placements on the OSE. It appears that our results can be

better explained by how the issuer intends to use the raised proceeds. Furthermore,

the long-term analysis reinforces the findings of Eckbo and Norli (2004) that

(most) private placement firms on the OSE achieve normal returns over a 3-year

holding period. The exception to this is firms in breach of covenants or in the need

of financial restructuring where abnormally negative returns are observed in the

long-run. The totality of our empirical findings indicates that the equal treatment

principle on the OSE is satisfied and that the pervasive use of board authorizations

cannot necessarily be considered a ´bad dealµ for existing shareholders.

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