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Divergence of opinion and long-run performance of private placements: evidence from the auction market
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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) |
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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 |
Item Statistics: | View statistics for this item |
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