Using daily Korean stock market data and public disclosure of equity transactions between 1996 and 2001, this paper tries to evaluate whether and how the market is going to respond to equity transactions with a related party.
The analysis shows that the stock market responds positively to buying equities when an acquiring firm has high cash flows. In addition, firms with either high ownership by foreign investors or by institutional investors experience negative firm returns when they buy equities. Moreover, foreign investors seem to reduce their holdings when chaebol affiliated firms engage in equity buying. Equity selling generates a higher rate of return when the selling firm was suffering from financial distress. The study also finds a positive return when a firm sells equities of affiliated firms. Foreign investors increase their holding when selling firm has experienced losses or firms sell its affiliated firms stock. Market return to selling stocks of affiliated firms and changes in foreign investors suggest that loosening ties with other affiliated firm increases the firm value.
학회소식
[2004년 제 2차] Effects of Equity Transactions with Related Party
작성자 : 관리자
조회수 : 937
게시일 :
2004-05-24
