| Since the reform of non-tradable shares,private placement has become the main form of equity refinancing in China’s capital market.Many listed companies raise the necessary long-term funds for operation through private placement,to expand the capital and asset.Since China’s macro economy has stepped into the new normal,capital market needs to serve the development of the real economy better.Therefore,as an important means of capital market to support the real economy,whether private placement can substantially improve the companies’ operating efficiency and performance,has become the concern of investors.Many scholars have found that the market performance of listed companies declines after the issuance of shares and public offering.In other words,long-term stock earning declines.This phenomenon is called "Performance Puzzle of SEO".However,the current literature about "SEO performance puzzle" scarcely discusses private placement,and analysis of operating performance is not sufficient.So it is difficult to reveal the role of capital market on the real economy.In addition,for why the performance of refinancing companies declines,the existing literature mainly draws on the ideas of western scholars,explaining mainly from the market timing and earnings management perspective.Few scholars pay attention to corporate governance problems.Therefore,based on the realistic background of China’s weak capital market environment and investor protection system,this paper discusses the function mechanism between private placement and operating performance.This paper follows the logical framework of "proving problems-analyzing causes-searching for solutions",and makes an empirical analysis of the three stages.First,with the A share listed companies which has implemented private placement from 2007 to 2012 as research samples,choosing the adjusted return on asset and equity yield rate as indicators of operating performance,this paper verifies that there is a negative impact of private placement on operating performance.Second,this paper uses the Difference in Difference method to analyze the reason of long-term operating performance decline,from the aspects of managerial agent problem and inefficient investment.Third,further study finds that the function mechanism of managerial agent problem and inefficient investment changes when major shareholders participate in the subscription,identifying the major shareholders’participation is a valid method to governance "SEO performance puzzle".The main conclusions of this paper can be summarized as follows:First,there is a negative correlation between private placement and the performance of China’s listed companies,so there is indeed a "SEO performance puzzle" phenomenon.The result of mean comparison shows that both the adjustment and the unadjusted performance indicators have the trend of rising first and decreasing later.Before the private placement,operating performance gradually increases,and declines rapidly after the private placement.The decline has obvious sustainability in next three years of private placement,and there is no callback trend.The medium and long term decline of performance can not be explained simply by the short-term impact of dilution.Regression analysis also shows that,whether the explanatory variable is adjusted or unadjusted performance index,the coefficient of private placement variable is significantly negative.It means that,that the private placement behavior of China’s listed companies would adversely affect the operating performance,whether or not the performance index adjustment adjustment coefficient,placement of variables are significantly negative,that private placement behavior would adversely affect the business performance of Listed Companies in China,and there is indeed a "SEO performance puzzle" problem.Second,after the private placement,the managerial agency problem and the resulting inefficient investment have contributed to the decline in operating performance.They are important causes of the "SEO performance puzzle".When managerial agency problem is serious,the decline of operating performance is more prominent.It can be seen that,managers’ self-interest behavior has promoted the deterioration of operating performance,and it is an important cause of "SEO performance puzzle".Compared with the companies whose investment is modest,after the performance of inefficient investment companies has declined considerably private placement,.Further,we divide the inefficient investment into under-investment and over-investment,and then carry out the double difference analysis,and find that excessive investment is an important factor in the decline of performance.The further study finds that,inefficient investment has a more adverse impact on business performance,when agency problem is serious.Third,large shareholders participating in the subscription can effectively restrict managerial agency problem and inefficient investment activities.It is an important method to alleviate the "SEO performance puzzle".In the case that large shareholders participate in the subscription,the decline of operating performance promoted by managerial agency problem and inefficient investment is greatly reduced.The subscription behavior of large shareholders can effectively restrain managers’ self-interest motivation and inefficiency investment behavior,and have a governance effect on the "SEO performance puzzle".Furthermore,when the participation level of the large shareholder is high and the stock ownership of large shareholders increases,the managerial agency problem and the inefficient investment play a less important role in the decline of the operating performance.This proves once again that large shareholders participating in the stock subscription can effectively ease the decline in operating performance after private placement.Compared with the existing literature,this paper may have the following innovations:First,this paper verifies the existence of "SEO performance puzzle" through the relationship between private placement and long-term operating performance of companies,and reveals the problems existing in the process of resource allocation of China’s capital market.Private placement is the most important form of equity refinancing of China’s listed companies in recent years,but its impact on the performance of enterprises has not yet been determined.This paper adjusts the operating performance of the private placement company through the industry matching grouping method,and controls the trend of the average performance of the non financing companies.Then selects the performance data from two years before and three years after the private placement for chart analysis and regression analysis,and found the negative impact of private placement on operating performance.The results show that,"SEO performance puzzle" exists in the private placement of China’s listed companies.It also means that raised funds do not translate to economic output effectively,and the the funds allocation of capital market exists problems.Second,based on the realistic background of China’s capital market,this paper provides a new explanation for the "SEO performance puzzle" from the perspective of agency problem.As for the performance of refinancing companies,most domestic scholars draw on the views of western scholars and attribute to the prior earnings manipulation.However,few studies consider the weak institutional and information environment of China’s capital market and the fact that the governance mechanism of listed companies is not perfect.From the aspects of managerial agency problem and inefficiency investment,this paper finds that management self-interest behavior and inefficiency investment contributes significantly to the decline of operating performance,while the mutual relations between them will strengthen their negative influence on operating performance.This discovery is based on emerging markets,enriching the theoretical results of the "SEO performance puzzle".Third,countering the agency problem of listed companies,this paper explores the solution to the "SEO performance puzzle" from the perspective of large shareholders,subscription.Previous studies have mainly studied the performance and causes of "SEO performance puzzle",and the discussion of how to solve this problem is rare.We find that when institutional and information environment is weak,large shareholders’ participation in subscription can form a synergistic effect,and curb managers’ self-interest behavior and inefficient investment.So it has obvious governance effect on "SEO performance puzzle".The analysis process combines the corporate governance theory with "SEO performance puzzle",and provides a solution to improve the company’s performance and the efficiency of resource allocation in the capital market.Based on the reality of China’s capital market,this paper combines of managerial agency problem,inefficient investment and major shareholder’s subscription,and demonstrates the relationship between private placement and operating performance.Limited by research foundation and personal ability,there are still some problems in the division of short and long term effects,the selection of control group sample and investment variable design,needing to be improved in the future research. |
