Private placements on the Oslo stock exchange : an empirical study of the short- and long-term stock performance following private placements during the time period 2000 to 2019

This thesis examines the short- and long-term performance of firms issuing equity privately on the Oslo Stock Exchange (OSE). By investigating an unexamined time period, this thesis adds new evidence to the existing literature of private placements. Contrary to former research, our results show a statistically significant negative stock price reaction to a private placement announcement. Previous literature explains the stock price reaction to a private placement announcement with the monitoring-, certification- or the management entrenchment hypothesis. These theories seem to be less relevant for justifying the stock price behavior of firms utilizing private placements on the OSE. It appears that our results can be better explained by how the issuer intends to use the raised proceeds. Furthermore, the long-term analysis reinforces the findings of Eckbo and Norli (2004) that (most) private placement firms on the OSE achieve normal returns over a 3-year holding period. The exception to this is firms in breach of covenants or in the need of financial restructuring where abnormally negative returns are observed in the long-run. The totality of our empirical findings indicates that the equal treatment principle on the OSE is satisfied and that the pervasive use of board authorizations cannot necessarily be considered a ´bad dealµ for existing shareholders.nhhma