The Empirical Research On The Relationship Between Private Equity Placrements And The Long-term Stock Price Performance Of The Listed Companies

Since the China securities regulatory commission promulgated and implemented the "Issuance of the securities of listed companies," at May 8,2006,the stock market rise to anupsurge of private issue, private issue of public equity on Chinese capital market has become the most important re-financing method on China's capital market.The private issue raised in recent years,so the long-term performance of the private issue was rarely studied. So,after the listed companies choose the private issue, whether there will be a positive impact to the listed companies long-term stock price performance.So, we doubt whether the long-term stock price performance of private issue to associated shareholders are higher than those of private issue to non-associated shareholders?Whether the long-term stock price performance of private issue used to purchase assets are higher than those of private used to construct projects?Based on sample data of listed companies implement private placement successfully,the paper will answer those questions,this is the purpose of the study and significance.The article analyzes the relationship between private equity placement and long-term stock price performance of listed companies theoretically and gets the conclusions that:(1)The listed companies can deliver well-developed information to the market through the private placement refinancing, Because of the introduction of active investors to regulate the company,reduce agency costs, and has a positive effect to increase company's performance. For this significant good news, private placement make a wealth effect for listed companies.(2)In some case associate shareholders directly involved in the management,associated shareholders will take the initiative to pursue maximum value of the company and have the ability to impose adequate supervision of the management, the associated shareholders subscribe have three years pre-sale period of time,can not chase short-term benefit,the factor also contribute to the associated shareholders pay more attention to the long-term stock price of the listed company,so the long-term stock price performance of private issue to associated shareholders are higher than those of private issue to non-associated shareholders.(3)Private placement of new shares to raise funds for the acquisition of assets, further increasing the proportion of major shareholding,increased ownership concentration,the major shareholders have a strong motivation to support the listed company,as to improve the long-term performance of the listed company.And achieved economic of scale,reduced transaction costs,improved assets management efficiency, not only transfer a positive signal to the market,but also actually improved the performance of listed companies.Private placement of new shares to raise funds to purchase equity shares of listed companies is better than long-term private placement of new shares to raise funds to construct the project long-term stock prices of listed companies. Summing up,private equity placement have a positive impact on the long-term stock prices of the listed companies.The paper takes listed companies which have implemented private equity placement from June,2006 to June,2007 as a sample,using empiricism to analyze:how the total long-term stock price performance after China listed companies private equity placement,and how long-term Stock price performance when private equity placement for different investor,and how long-term Stock price performance when funds used for different application. The empirical result shows that:(1) private equity placement have a positive impact on the long-term stock prices of the listed companies.(2) the long-term stock price performance of private issue to associated shareholders are higher than those of private issue to non-associated shareholders.(3)Private equity placement of new shares to raise funds to purchase equity shares of listed companies is better than long-term private placement of new shares to raise funds to construct the project long-term stock prices of listed companies.Summing up,the theoretical analysis and empirical test results are the same.The content of paper is as follows:the first part is the introduction, introducing research background, research significance and the issues that the paper will reveal and so on. The second part is literature review, reviewing the literatures of the private equity placements at home and abroad. The third part is the part of theoretical analysis. With the agency cost theory,information asymmetry theory,supervision and management theory of defense effect hypothesis to analysis the long-term stock prices of the private equity placement, and then put up three hypotheses.The fourth part is the part of empirical analysis of the private equity placement of Chinese listed companies and long-term stock price,is the empirical part of this paper.The fifth part is conclusions of research and policy suggestions.