Premium
Strategic benefits to firms issuing private equity placements
Author(s) -
Folta Timothy B.,
Janney Jay. J.
Publication year - 2004
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.373
Subject(s) - information asymmetry , corporate governance , private equity , business , equity (law) , empirical evidence , private capital , private information retrieval , industrial organization , finance , public economics , economics , microeconomics , production (economics) , philosophy , statistics , mathematics , epistemology , political science , law
For young technology firms, acquiring resources can often be costly due to the information asymmetry and uncertainty that exist surrounding the new technology. We contend that firms able to issue private equity can better manage their ability to mobilize three kinds of resources: capital, research partners, and commercial partners. We investigate the existence of long‐term, strategic benefits to private placements, and a number of factors may determine the long‐term effectiveness of this governance form. Overall, the empirical analyses demonstrates that private placements provide long‐term benefits to firms by reducing hazards associated with information asymmetry. Copyright © 2003 John Wiley & Sons, Ltd.