Proprietary costs and the equity financing choice

• 成果类型: Article
• 署名作者: Floros, Ioannis V.; Sivaramakrishnan, Konduru; Zufarov, Rustam
• 署名单位: University of Wisconsin System; University of Wisconsin Milwaukee; Rice University; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09745-6
• 发表日期: 2024
• 页码: 1276-1319
• 关键词: institutional investors; executive-compensation; propensity score; Contract terms; Hedge funds; disclosure; INFORMATION; COMPETITION; PRIVATE; performance

摘要

We develop a firm-level private information index with three unique features. First, the index is a direct measure of the nature and magnitude of private information that is proprietary. Second, it is multi-dimensional. Third, it is not specific to any setting. We conduct several tests to validate this index against firm-specific and industry-level proprietary cost proxies. We then use it to examine the role of proprietary information in a firm's equity financing choice between private investments in public equity (PIPEs) and seasoned equity offerings (SEOs). In this context, the proprietary cost hypothesis posits that firms wanting to avoid public dissemination of sensitive private information can better do so by choosing PIPEs. Our tests strongly support the hypothesis. The results are robust to alternate index specifications and other factors that influence this choice.