Empirical Study On Impact Of Private Placement On Chinese Listed Company Performance

Utilizing the securities market for refinancing is an important way of consistentdevelopment and expanding scale for the listed companies, and it is also a necessary measure ofdevelopment to optimize resource allocation function of the securities market. Since the reformof Equity Division, private placement has become the most active equity refinancing instrumentin China’s capital market. The statistics of China Securities Regulatory Commission show thatthe issuance times and the financing scale of private placement in Chinese A stock market haveperfectly exceeded other refinancing instruments from2006. The reasons why private placementis widely welcomed are as below. Firstly, private placement has a” one simple and there low”characteristic. Secondly, the lock period of new stock in private placement can reduce the impacton the secondary market. Thirdly, through private placement, the performance of listedcompanies may be improved by injection of quality assets and integration of relative enterprises.Lastly, the management of listed companies may be improved by the introduction of institutionalinvestors in private placement. The equity financing way of private placement first appeared inthe United States. Western researches on private placement of listed companies were started byWruck (1989). He studied the firm value of private placement in terms of equity ownership, andthink that private placement reflects the benign supervision from investors to issuer. Then,Hertzel&Smith (1993) documented their viewpoint of asymmetric information to explainprivate placement of listed companies. These two hypotheses became the basis and mainstreamfor the researches of private placement by public listed companies. As the capital market in China started late, foreign researches on the object hardly involve Chinese situation. This articlewill be on the basis of theoretical analysis, collected2006-2010implementation of the privateplacement of listed company data, and through empirical methods to study the private placementof the impact of the events on the performance of listed companies in China.Currently, researches about the impact of the private placement on the performance of listedcompanies at home and abroad mainly focused on short-term stock price announcement effect,and the conclusions formed were also more consistent, that is the first part of empiricalresearches. The first empirical part about the short-term announcement effect of the stock priceadopts the method of “Event Research”, also with univariate T-test, and empirical evidenceshows that the private placement of short-term performance has a significant positiveannouncement effect, which means that abnormal return during the event window is significantlyabove0, including Average Abnormal Return(AAR) and Cumulated Abnormal Return(CAR).The second part of the empirical research is the impact on the events of the privateplacement of long-term operating results of listed companies. The empirical tests of the long-runmarket performance show that the companies which conducted private placement will have atwo-year stronger performance after the announcement by the buy-hold abnormal return model.These findings are in contrast with the weak stock performance evidence from USA capitalmarket. The companies which conducted private placement have significant strongerperformance than their matching companies before or after private placement. In addition, wedon’t find direct evidence that large shareholder taking the private placement as a tool fortunneling. There is a huge difference between Chinese and the American capital markets in thisfield, and it illustrates the general conclusions of the United States may not be suitable for China, which is precisely the purpose of this study.According to the above results, this paper puts forward the following suggestionsincluding：（1）Strengthen the approval and supervision of the private placement matters（2）Improve the issuance of the standard to the largest shareholder and regulatory（3）Legitimatelyguide and regulate institutional investors to play a role（4）Enhance rational investment conceptof the small and medium investors（5）Establish and improve the information disclosuremechanism.