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Abstract

In this paper, we propose and construct a direct measure of investors' divergence of
opinion based on auction bids data of the private placements in China. We find that
the firms with higher bids dispersion generate lower long-run stock returns after the
issuance of private placements. This effect is economically significant and robust when
controlling for market discount, earnings management, analysts forecast dispersion,
and self-selection bias. Moreover, this negative relation is stronger for stocks with
more stringent short-sale constraints. Our findings therefore provide strong evidence
in support of the Miller (1977)'s divergence of opinion hypothesis.

Item Type:	Report (Discussion Paper)
Authors/Creators:	Han, J and Pan, Z and Zhang, G
Keywords:	private placement; divergence of opinion; long-run stock returns; short-sale constraint; auction
Publisher:	University of Tasmania
Copyright Information:	Copyright 2017 University of Tasmania
Additional Information:	JEL classification: D44, G12, G14 Discussion Paper Series N 2017-09
Item Statistics:	View statistics for this item

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