A Study On Over-SEOs Of China's Listed Firms

Ever since 2006, listed firms on China's A-shared market have tended to issue over Seasoned Equity Offerings (SEO). There is no doubt about the fact that SEOs lay solid capital foundation for sustainable development of listed firms. However, SEO announcements, more often than not, negatively influence share prices. Moreover, firms with SEOs afterwards usually underperform those without SEOs. Based on the sample of listed companies that extended SEOs on China's A-share market from 2007 to 2010, this paper has studied motions and motives of SEO stakeholders by means of statistic description and empirical analysis, looking forward to finding out solutions to correct and improve SEO activities.First of all, the paper has studied on the quantitative characteristics of SEOs, so as to prove that listed firms on China's A-shared market have an obsession to SEOs. Then it has revealed the negative value of SEOs with the "Net Return on Asset" and "Earnings per Share" index after SEOs. Afterwards, analyzed benefits of each stakeholders, the paper has creatively concluded that it is the benefit games among controlling shareholders, managers, intermediary institutions and governments that lead to listed firms' obsession to SEOs. Through SEOs, controlling shareholders transform firms' wealth to individual through three tunneling channels:alteration of financial capital, connected party transaction and asset strip. Under current situation of institutional selection, cross appointment in affiliated firms, low restriction and low incentive, managers'individual financial wealth positively relates to firm's scale instead of profit. Intermediary institutions are hired by firms to serve the SEOs and receive payment from firms while governments might be captured by firms as well. Out of natural interest bond or benefit transportation, stakeholders form a strategic group to co-promote SEOs.