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Divergence of opinion and long-run performance of private placements: evidence from the auction market

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Han, J and Pan, Z and Zhang, G (2017) Divergence of opinion and long-run performance of private placements: evidence from the auction market. Discussion Paper. University of Tasmania.

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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)
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

Date Deposited: 17 Jul 2017 01:28
Last Modified: 17 Jul 2017 02:08
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