Research On The Performance Of Seasoned Equity Offerings In China A-share Listed Companies

The research about seasoned equity offerings of listed companies is a hot topic in corporate finance theory. According to the capital structure pecking order theory, listed companies should firstly choose internal retained earnings, then bond financing, and finally equity financing. This choice sequence can reduce the adverse effect information to the listed companies’share prices. In foreign countries, the stock market and bond market have a consistent development. Listed companies have a relatively mature and perfect financing environment. In our country, because of the listed companies’own preferences, the relatively underdevelopment of the bond market to the stock market, the active guidance of stock financing policy and other factors, the listed companies have a unique preference of seasoned equity offerings. At the same time, many researches from domestic and overseas scholars show that, the companies’performance can’t get a promotion after seasoned equity offerings. On the contrary, it has an obvious decline after seasoned equity offerings. Against to the preferences for seasoned equity offerings and its performance in our country, this paper systematically analysis the reasons of the preferences for seasoned equity offerings of the A-share listed companies in China, the effect of seasoned equity offerings to the financial performance and market performance, and the formation mechanism of this effect. Based on the research conclusion, this paper puts forward policy suggestions. It riches relevant research achievements in domestic and overseas, and has certain theoretical significance. At the same time this paper can regulate the listed companies’refinancing behavior, optimize their capital structure and improve the companies’total value. Then we can improve the financing efficiency of China’s securities market and make it develop its resources allocation function better. So it has great practical significance.The main content of this paper is the research of performances and reasons of the preferences for seasoned equity offerings in China A-share listed companies, the effect of the seasoned equity offerings to companies’ performance and its mechanism. First of all, in the research of the performances and reasons of the preferences for seasoned equity offerings, this paper systematically introduced the background and policy evolution of seasoned equity offerings of A-share listed companies. Then we found the equity refinancing scale is relatively bigger in this kind of environment and companies have obvious preferences for seasoned equity offerings. After that, this paper applied the information asymmetry theory, the free cash flow theory and the time window theory to explain these preferences.Secondly, in the study of the effect of the seasoned equity offering, this paper made longitudinal analysis and transverse comparison of the performances of companies with seasoned equity offerings. Different with the existing literature, in which they contrast the companies’financial performance or discuss the stocks’ excess rate of return, this paper made longitudinal comparison and horizontal comparison of the listed companies’financial performance and market performance, and subdivided the effect on long-term financial performance, short-term financial performance, long-term market performance and short-term the market performance. In the market performance research, this paper chooses the price per book value ratio (PB) as a measurement of the change of market performance of listed companies. Although this index’application in our country is not widely enough, it’s a very good index to measure the change of market performance and many scholars’ research has support this. It provides a good idea to compare the market performance of listed companies, that’s a big different with the existing literature research. Research shows that, longitudinally, seasoned equity offerings have negative effect to the companies’long-term financial performance and long-term market performance and have no obvious effect to the short-term financial performance and short-term market performance. Transversely, the relatively effect of seasoned equity offerings to the listed companies’financial performances in different industries are different, and the relatively effect of seasoned equity offerings to the listed companies’market performance is very small, almost no effect.Finally, in the research of the mechanism of this effect, this paper had a selection of373A-share listed companies with seasoned equity offerings from2007 to2009as research samples. Through the theoretical research and empirical research, we made the change of long-term financial performances of listed companies with seasoned equity offerings to be the explained variable. After made a regression test to the possible explanation variable, we found that the free cash flow theory and surplus management theory can be very good explanations to the negative effect of seasoned equity offering. Then this paper puts forward the policy suggestions of strengthen the supervision of the use of free cash flow and the earnings management of big shareholders in listed companies.