Economics of the Private Placement Market

摘要

The private placement market is an important source of long-term funds for U.S. corporations. Between 1987 and 1992, for example, the gross volume of bonds issued in the private placement market by nonfinancial corporations was more than 60 percent of that issued in the public corporate bond market. Furthermore, at the end of 1992, outstanding privately placed debt of nonfinancial corporations was more than half as large as outstanding bank loans to such corporations. Despite its significance, the private placement market has received relatively little attention in the financial press or the academic literature. This lack of attention is due partly to the nature of the instrument itself. A private placement is a debt or equity security issued in the United States that is exempt from registration with the Securities and Exchange Commission (SEC) by virtue of being issued in transactions 'not involving any public offering.' Thus, information about private transactions is often limited, and following and analyzing developments in the market are difficult. The last major study of the private placement market was published in 1972, and only a few articles have appeared in economics and finance journals since then. This study examines the economic foundations of the market for privately placed debt, analyzes its role in corporate finance, and determines its relation to other corporate debt markets. The market for privately placed equity is briefly described in appendix B. In the remainder of the study, the term private placement refers only to privately placed debt.