Empirical Research On Performance Of Chinese Listed Companies After Rights Issues

With the development of Chinese security market, rights issues has been one of the most important financing channels of Chinese listed companies, which also has important influence on the performance of listed companies. This paper investigates the performance of 563 companies after raising capital through rights issues. The results show that the performance of 563 samples rises earlier and drops later.This paper investigates the influence factors which result in the downtrend of the performance of listed companies. First, the paper observes the impact on the company's performance as the capital raises; second, the existence of earnings management of the listed companies is tested. Last, the different long-run performance of different groups is analyzed from three aspects, including the extent of the company's debt equity structure, the ownership structure and the usage of the collected funds. The empirical results show: (1) the performance of companies which change the direction in the items specific in their prospectuses is significantly worse than that of companies which do not change the direction the direction; (2) companies of higher liability presents poor performance; (3) large shareholder's behavior affects the company's performance after rights issues and the performance of listed companies can be significantly improved if the large shareholder adopts some action to improve the company's value. In addition, both the good financial structure and the financial decision made by the large shareholder for the purpose of enhancing the value of list companies have a positive influence on the performance after rights issues. Our experiment indicates that the descending performance is the result of several factors which include the financial data decreases as the capital raises, the listed companies' earnings management to obtain the qualification of rights offering and the inefficient use of the funds after rights issues.Through these analyses mentioned above, the following significant suggestions for list companies are derived to improve their performance after rights issues. (1) Some measures should be adopted to restrict the earnings management. (2) the capital collected by the rights issues should be used properly, carefully, and according to plan. Furthermore, some useful advices are proposed for government's supervision section in order to improve their regulatory methods.