Equity Refinancing Behavior Of China's Listed Companies

In the environment of market economy, refinancing ability is very important to the developing ability of the listed companies.The listed companies in China often select Secondary Equity Offering which include: Right issuing, Seasoned Equity Offering, Convertible Bonds.There are two abnormities on the refinancing of China's listed companies: first, the firms do not follow the classical pecking order theory, but have prejudice on the equity refinancing; second, which way of SEO is better?As for these two questions, there are so many foreign scholars preceded the analyses from different angles, and they also have achieved a lot of valuable conclusions. But in the stock market in China there is a very special situation——split share structure. The classical theories developed in the West can not give a rational interpretation for the abnormalities. This paper just try to analyze the factors which will affect the company's refinancing behavior and the potential reason and put forward relevant strategies in order to help relevant department formulate rational refinancing policy to guide the companies to refinancing healthily and correctly, so make the stock market have a sound development.The paper has six parts:The first part:Introduction of the paperThe second part summarizes the relevant study and classic theories of refinancing.The third part makes the research of the development on SEO of listed companies and gives a comparative analysis on it between China and other developed countries.The forth part argues the equity refinancing prejudice of listed companies in China. The statistical data shows that listed companies rely on external financing, and especially rely on equity refinancing. The fifth part studies on the SEO'forms. If listed companies determine to do SEO,which way is better? (Rights issue or Placement) The paper makes research on the way of the equity refinancing on theoretic analysis and statistical analysis.The sixth part draws a general conclusion of the dissertation and gives some suggestions about the listed companies'SEO.The paper uses methods of theoretic analysis and comparative analysis to verify the equity refinancing prejudice of China's listed companies. We find that the listed companies have prejudice on the equity refinancing.The paper uses methods of theoretic analysis,comparative analysis and empirical analysis to verify the low equity refinancing efficiency of China's listed companies. We construct a model on the equity refinancing, and the model shows that the listed companies will get negative abnormal returns on the announcement of rights issue and placement and the market performance of rights issue is better than that of seasoned equity offering, and they are both statistically significant at the 10% level.The paper uses methods of theoretic analysis and empirical analysis to find out the factors which determine the way of SEO. The model shows that the market value, the proportion of tradable shares holder and the P/E ratio of the company will affect it.The key points of this thesis:1. The SEO is become more important, and the refinancing is almost as important as IPO in the scale of financing. In China listed companies rely on external financing, and especially rely on equity refinancing.2. In our country the listed companies are often have equity-financing preference because the financing environment they met is that the enterprise bond market develops so slowly that the companies feel the"free illusion"to equity financing and hard restraint of enterprise bond. So, the opportunism behavior of equity financing takes place.3. After analyzes the factors which affect the companies'behavior, author find that the market value, the proportion of tradable shares holder and the P/E ratio of the company will affect the behavior of the company.4. After analyzes the listed companies'operating performance around SEO, thus draws a conclusion that companies'operating performance have generally dropped and after SEO. This is directly relation to the companies'motivation, because they only financed for financing. So, they also change the purpose of the financing money. And lead to a low ratio of assets/liability. These can also affect the performance of the company.The paper has made some characteristics and contributions:The paper describes refinancing theory and makes comments on them. After that the paper argues about prejudice on the equity refinancing. Then it discusses the choice of the equity refinancing. This paper made a all-around study on SEO in China.Secondly, this paper use the financial data from 1998 to 2003, so the data have timeliness, and author compared Right issuing and Placement, so it relating tightly to the real situation in China now.Thirdly, base on the study, author find the real controller's benefit is the most important fact which affect the behavior of the companies, and the motivation of the company is only want to cheating money and this lead to the dropped of the performance of the company.