Research Onannouncement Effect Of Private Placements In China

In 2006, with the successful completion of China's share structure split reform, the securities market began to rehabilitation, which created favorable conditions for the promotion of Private Placement. China Securities Regulatory Commission launched the "Administrative Measures for Listed Companies'Stock Issuance" on May 8, 2006, it made a series of clear directional additional provisions for Private Placement, which has laid a legal foundation for the use of The private placement in China's capital markets. Subsequently, as a way of share re-financing, Private Placement has being listed companies in favor because of its advantages, such as easy, convenient operation, the program simple and low cost. And more and more combined with the Private Placement mode of operation of the new capital is also being constantly try and promotion. Meanwhile, Private Placement companies'stocks are popular by investors. Private Placement has become the most mainstream way to re-financing, it has been an extremely wide range of applications, and it plays a very important role in China's capital markets.After the implementation of Private Placement, a lot of scholars in China have made some analysis and studies in some areas such as systems, pricing methods and investment value of Private Placement. However, there are not many empirical studies about the market reaction to additional public notice, and the existing research are mostly confined to the private placement announcement effects of the overall study, and less by taking into account the launch due to the additional issue of the different objects that may give investors a different signal, thus will bring different influences to the stock price during the notice.In this Paper,we use 268 Chinese A-share listed companies which have implemented Private Placement during May 2006 to December 2009 as the sample, and using the event study method and multiple linear regression model to analyze the short-term market reaction ( excess rate of return) for Private Placement firms. We also analyzed whether the market reaction is different when the major shareholders take part in Private Placement and they participate in different ways. It is proved that Private Placement caused significant positive excess returns, such a positive effect in the (-4, 1) events are most obvious. It also shows that leakage of information before Private Placement exists. Furthermore, through the company's excess return rates of the sample group , we found that there is significant difference between the announcement effects caused by the placements with difference issue targets. The effects of the companies whose issue targets include major shareholders are more significant than others. Meanwhile the investors are not that sensitive to what the major shareholders pay for the shares they subscribe. In response to these empirical results, this paper has made some relevant explanations and gives some suggestions.