“Is the PIPES Market Really a Sideshow? Capital Market Conditions and Private Equity Sales by Public Firms,” May 2011 (with M. Huson and P. Malatesta).
Abstract: We investigate the relations between capital market conditions and the volume and pricing of private investment in public equity (PIPE) issues over the 1995 to 2009 period. We find that both PIPE issue activity and PIPE price discounts are related to capital market conditions. The number of PIPE issues is greater following months with high (i) market liquidity, (ii) market returns, (iii) IPO volumes, (iv) IPO underpricing, and (v) Treasury bond yields. In regressions that control for firm and issue characteristics, capital market conditions, such as aggregate liquidity, recent returns in the public equity market, the level of interest rates, and tightness in the credit markets are significant predictors of observed PIPE price discounts. Furthermore, a time series analysis indicates that returns to PIPE investors as of the day following the PIPE issue closing are significantly positively related to both the market risk premium and the Fama-French SMB factor. Surprisingly, PIPE price discounts are positively related to aggregate market liquidity.
“The Decline in the Cost of Private Placements,” May 2010 (with M. Huson and P. Malatesta).
Abstract: This study investigates the determinants of changes in the pricing of private investment in public equity (PIPE) issues. PIPE price discounts decreased from an average of 16.4 percent during the 1995 to 2000 period to an average of 9.8 percent during the 2001 to 2007 period. This decrease reflects changes in the characteristics of the public firms that are accessing the PIPE market as well as changes in the pricing of issue and issuer characteristics. In addition, part of the decrease is attributable to changes in PIPE contracting practices that have caused price discounts in recent years to better reflect market conditions on the day that the securities are issued. The observed change in price discounts is not explained by changes in the liquidity of the shares. (Download)
Published and Forthcoming Articles:
Hertzel, M. G., M. R. Huson, and R. Parrino. “Public Market Staging: The Timing of Capital Infusions in Newly Public Firms.” September 2011. Forthcoming in Journal of Financial Economics.
Gillan, S. L., Hartzell, J. C., and R. Parrino. “Explicit vs. Implicit Contracts: Evidence from CEO Employment Agreements.” Journal of Finance., Vol. 64 (2009), 1629-1655.
Borokhovich, K., Brunarski, K., Harman, Y., and Parrino R. “Variation in the Monitoring Incentives of Outside Blockholders.” Journal of Law and Economics., Vol. 49 (2006), 651-680.
Ju, N., Poteshman, A., Parrino, R., and Weisbach M. “Horses and Rabbits? Optimal Dynamic Capital Structure from Shareholder and Manager Perspectives.” Journal of Financial and Quantitative Analysis., Vol. 40 (2005), 259-281.
Poteshman, A., Parrino, R., and Weisbach M. “Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects.” Financial Management, Vol. 34 (Spring 2005), 21-60.
Huson, M., Malatesta, P., and Parrino R. “Managerial Succession and Firm Performance.” Journal of Financial Economics, Vol. 74 (2004), 237-275.
Parrino, R., Sias, R., and Starks, L. “Voting With Their Feet: Institutional Ownership Changes Around Forced CEO Turnover.” Journal of Financial Economics, Vol. 68 (2003), 3-46 (lead article).
Hadlock, C, Lee, S., and Parrino, R. “CEO Careers in Regulated Environments: Evidence for Gas and Electric Utilities.” Journal of Law and Economics, Vol. 45 (2002), 535-563.
Huson, M., Parrino, R., and Starks, L. “Internal Monitoring Mechanisms and CEO Turnover: A Long Term Perspective.” Journal of Finance, Vol. 56 (2001), 2265-2297.
Parrino, R. and Weisbach, M. “Measuring Investment Distortions Arising from Stockholder-Bondholder Conflicts.” Journal of Financial Economics, Vol. 53 (1999), 3-42. (lead article)
Byrd, J., Parrino, R., and Pritsch, G. “Stockholder-Manager Conflicts and Firm Value.” Financial Analysts Journal, Vol. 54 (May/June 1998), 14-30. (lead article)
Parrino, R. “CEO Turnover and Outside Succession: A Cross-Sectional Analysis.” Journal of Financial Economics, Vol. 46 (1997), 165-197.
Borokhovich, K., Brunarski, K., and Parrino R. “CEO Contracting and Antitakeover Amendments.”Journal of Finance, Vol. 52 (1997), 1495-1517.
Parrino, R. “Spin-offs and Wealth Transfers: The Marriott Case.” Journal of Financial Economics, Vol. 43 (1997), 241-274.
Borokhovich, K., Parrino, R., and Trapani, T. “Outside Directors and CEO Selection.” Journal of Financial and Quantitative Analysis, Vol. 31 (1996), 337-355.
Martin, J. and Parrino, R. “Director Responsibility and Consulting Relationships.” Directors and Boards, Vol. 20 (Summer 1996), 32-35. (cover article)
Vandell, R. and Parrino, R. “A Purposeful Stride Down Wall Street.” The Journal of Portfolio Management, Vol. 12 (1986), 31-39.