The choice between rights offerings and private equity placements

We develop and test a nested logit model to examine how firms choose between a rights offering and a private equity placement. Family controlled firms avoid issue methods that dilute control benefits or subject them to more monitoring, especially when the family's control margin is small and the wedge between votes and capital is large. Control considerations also affect security design. Private placements reduce contracting and ex post holdup costs in new product market relationships. Finally, firms with higher asymmetric information about firm value tend to involve underwriter certification in a rights offering, and to choose a private placement when information asymmetries are extreme.