Empirical Study On Announcement Effect Of The Equity Private Placement Of China's Public Companies

"Management of listed companies to issue securities" was issued on May 8, 2006. Initial results have been achieved in China's securities market after equity division reform. Market financing function was restored. It is in this case, equity private placement system was formally introduced into China. As a new means of equity financing, equity private placement financing has developed rapidly in recent years in China, and has become an important means of equity refinancing in listed companies in China. According to research scholars, be opposite to the negative effects of announcement of the public offerings, private placement announcement often generates positive stock price effect. Announcement effect is shown by the changes in stock prices from the secondary market brought by the announcement of equity private placement. And the abnormal return and cumulative abnormal returns are often been used to test it.209 (after screening) listed companies in Shanghai and Shenzhen Markets has been chosen as a sample, which had completed the equity private placement from May 8,2006 when the "Management of listed companies to issue securities" has been promulgated by the Chinese Securities Regulatory Commission to December 31,2009.And I used event study methods to do the empirical study of the equity private placement announcement effect and the factors that influence the announcement effect.The first part describes the research background and significant of this study. The domestic and international study results about the private placement announcement effect has been reviewed and evaluated. And the full text of research ideas and structure has been introduced.In the second part, the relevant theories and hypothesis, domestic and international theories and results on this research have been reviewed, which is the basement of the whole study. Then the issue terms, implementation steps, and the background and development of the announcement of the equity private placement have been analyzed.In the third part, the empirical study has been designed. The event day, event window and the sample have been decided. The hypotheses have been raised and the corresponding representative variables have been set. Finally the discount-adjusted abnormal return was set to be the dependent variable, and the establishment of multiple linear regression model was set up.The forth part is the most important one in the whole study. We did the empirical study about the announcement effect on the private placement. Overall analysis showed that the significant positive announcement effect did exist 10 trading days before and after the event day. It means there is a rise in very short time before and after the event day. The rise before the event day is much apparent. The regression analysis of the model showed that:there exists significant positive announcement effect during the 10 days before and after the event day, which means the stock prices rise during that short time. We found that the announcement effect before the event day is more obvious. Return on equity(ROE), firm size, fund-raising size, the share change of the largest shareholder, ownership concentration, asset-liability ratio and the purpose of equity private placement have effect on the discount-adjusted abnormal return, the market situation does not influent the announcement effect.In the end relevant explanations for the results on the base of the theories have been given. The disclosure of information before announcement day causes the obvious announcement effect; the significant negative effect caused by firm size and the significant positive effect caused by the share change of the largest shareholder could verify the information asymmetry theory; the positive effect caused by the fund raising size verifies the price pressure hypothesis; the return on equity(ROE) has significant positive effect on discount-adjusted abnormal return verifies the investment opportunities hypothesis is correct; the purposes of equity private placement including asset restructuring and the introduction of strategic investors have positive effect on discount-adjusted abnormal return verifies the investment opportunities hypothesis; asset-liability ratio have positive effect on discount-adjusted abnormal return verifies the information asymmetry theory to some extent; the changes of ownership concentration have positive effect on the announcement effect, but the result was not significant, it just confirmed on Wruck's study about the relation between ownership concentration and the announcement effect; this paper particularly sets the market situation as a variable but the effect is not obvious. Finally, the policy recommendations are put forward to make the stock market authorities better regulate Chinese listed companies conduct equity private placement and recommendations about the small and medium investors' investment decision are raised.