2017-09_Han_Pan_Zhang.pdf (595.97 kB)
Divergence of opinion and long-run performance of private placements: evidence from the auction market
reportposted on 2023-05-28, 00:20 authored by Han, J, Pan, Z, Zhang, G
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.
Department/SchoolSchool of Computing and Information Systems
PublisherUniversity of Tasmania
Rights statementCopyright 2017 University of Tasmania JEL classification: D44, G12, G14 Discussion Paper Series N 2017-09