A Research On Wealth Transfer Of Private Placement In China’s Listed Companies

The private placement is also called non-public offering，which is the behavior of stockissued to specific objects in a listed company privately. Before the split share structure reform,Equity refinancing placements in China’s Listed Companies were mainly on allotment andpublic issuance; After the split share structure reform, the private placement became the mostpopular equity refinancing placement for the listed companies with its simple advantage, andhad got a rapid development in recent years, had achieved amazing results not only onnumber but also on financing scale. It can be said that the success of the split share structurereform provided the motivation of system and a strong guarantee for the implementation ofthe private placement. But at present the laws and regulations on the private placement inChina are inadequate, the defects of the system provides a "hotbed" for the largest shareholderto transfer wealth in the process of private placement. Then, whether there is wealth transferin private placement under the control of the largest shareholder. If there is, how the largestshareholder realizes the wealth transfer, how to better protect the interests of minorityshareholders in the process of wealth transfer, these problems are worth thinking and concerns.This paper selects250listed companies which had implemented successfully the privateplacement in Shanghai and Shenzhen A-share market from2008to2010as the study samples,and studies the wealth transfer of private placement of in China’s listed companies. First weelaborates the research background, puts forward the problem, organizes domestic and foreignliterature, describes research ideas and research methods, laying the foundation for this article.Secondly, we not only analyze the institutional background and the course of development ofthe private placement, but also the present financing situation of private placement in China’sListed Companies.Then, we analyzes the existence of wealth transfer in private placement oflisted companies in China using the event study methodology and regression analysis. Finally,we analyses the way of wealth transfer in private placement.This study found that:(1) the market reaction of wealth transfer in was weaker than thatof wealth transfer out, that is there is wealth transfer in the process of private placement;(2)when the largest shareholder completely subscribe for the new sha-res of private placement,the pricing basis will appear to underperform the broader market,that is the excess returns isless than zero, and there is the possibility of wealth transfer which was manipulated by the l-argest shareholder;(3)The discount level when the largest shareholder completely subscribesfor the new shares of private placement is the highest, and the discount level is the lowest w- hen the major shareholder does not participate in subscription, existing significant group dif-ferences between them, so there is the possibility of wealth transfer which was manipulatedby the largest shareholder through directional additional discount in the private placement ofListed Companies;(4)Between he wealth transfer (that is the difference between the propor-tion of the largest shareholders to subscribe for the new shares of directional issuance and theproportion of shares held by the largest shareholders before the directional issuance) and thediscount level of directed issuance there is a significantly positive correlation;(5) The mark-et reaction when the largest shareholder subscribes for new shares of private placement by a-ssets is weaker than that of non-asset based subscription. In short, in the process of private p-lacement, the largest shareholder will transfer wealth through the manipulation of discountand utilization of assets to subscribe.