A global analysis of Private Investments in Public Equity

Leverage, investment and institutional environments: Evidence from emerging markets

“…This indicates a greater need for monitoring through leverage in low quality regulatory environments that suffer from greater information asymmetry and opaqueness. This finding corroborates theoretical and empirical studies suggesting that institutional quality environment matters for economic outcomes (Andriosopoulos & Panetsidou, 2021;La Porta et al, 1997Qian & Strahan, 2007). Finally, we find that the negative relationship between investment and leverage in low growth firms is stronger in high ownership concentration firms.…”

“…Also, monitoring through ownership concentration complements monitoring induced by leverage. Our findings complement the literature on law and finance, ownership structures and capital markets (Andriosopoulos & Panetsidou, 2021; Claessens et al, 2000; Gompers et al, 2003; King et al, 2021; La Porta et al, 1997, 1998; Lombardo & Pagano, 1999; Shleifer & Vishny, 1997). Hence, this examination provides important implications to policy makers as it advances our understanding on the role of leverage as a monitoring mechanism across different institutional quality environments and varying ownership concentration structures.…”

“…Meanwhile, firms in corrupt environments can be led to worse economic growth by forgoing good investments for bad ones or by facing more financial constraints (Park, 2012; Ullah, 2020). Importantly, strong country governance leads to better economic outcomes, superior transparency, investor protection and monitoring (Andriosopoulos & Panetsidou, 2021; Chiou et al, 2010; Gompers et al, 2003; Hooper et al, 2009; Lombardo & Pagano, 1999; Lombardo & Pagano, 2006; Qian & Strahan, 2007; Rajan & Zingales, 1998; Wurgler, 2000). Therefore, markets with weaker regulatory environments that suffer from opaqueness and information asymmetry, could be in greater need for monitoring.…”

“…Next, to test the robustness of our results, we exclude countries that dominate our sample, to assess whether our results are influenced by these countries. This is standard practice in international literature (e.g., Alvarez et al, 2018; Manconi et al, 2019; Andriosopoulos & Panetsidou, 2021). Table 6 presents the results.…”

Price run-ups and insider trading laws under different regulatory environments

“…We further exclude deals on the years 1999-2000 and on the years 2007-2008 in order to examine whether our results are driven by the dot-com bubble and the global financial crisis following relevant literature (Falato and Liang, 2016;Dissanaike et al, 2020;Li, 2020;Andriosopoulos and Panetsidou, 2021). The results reported in Panel E of Table 7, show that the CAARs are qualitatively similar to our main findings suggesting that our results are not driven by the dot-com bubble or the global financial crisis.…”