| In the July of 1998, the first success of the seasoned equity offering (SEO) meant the way of refinancing had expanded. Comparing to the Right Offerings, SEO had less constraints and could gather more capital. Thus lots of listed companies declared SEO even when they had chosen right offering, which leaded to the boom of SEO. However, the investors' opinion to SEO turned to be more and more negative.In this paper, announcement effect refers to the price reaction after the declaration of SEO. By using the methods of theoretical and empirical analysis, this paper examines the impact of SEO on shareholders' wealth and identifies the relevant factors that explain the associated price reaction based on the sample of SEO companies during the period from Jan 1st, 1998 to April 30th, 2004.At first, we review and appraise the foreign and domestic documents on SEO, and find some factors that influence the announcement effect considering the special conditions in Chinese security market additionally. The paper uses the abnormal return to measure the announcement effect with market-adjusted returns method over a two-day period, and get the result of the significant negative 2.289%, which approves the announcement effect also occurs in China. And the analysis of parameter offering dilution tells the companies' market-valve decreases 19.59%. We also analyze the wealth transformation effect among kinds of shareholders in the short turn. At last we establish a linear regression model, influence factors as independent variable and abnormal return on the announcement day as dependent variable. The result shows free cash flow the proportion of none-current stock subscription ratio of the previous shareholders discount rate and the cumulative abnormal return in the previous 20 days before announcement have significant positive effect on AR on the announcement day. According to the result of the foregoing analysis, this paper gives some suggestions. |
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