A Research On The Motivations And Financial Consequences For Listed Companies’ Private Equity Placement

Private equity placement is a new way of financing in China’s capital market, it is issued by a simple process, low barrier, short cycle. Now it is extremely sought after by the listed companies in China. In recent years, either in quantity or in terms of scale the private equity placement of listed companies are increasingly grew, private equity placement is becoming one of the research focus in China’s accounting academic. Most of the research on motivations and financial consequences of private equity placement is in theory, empirical research is few. This paper attempts to combine the use of theoretical analysis and empirical research methods to explore the directional growth between the motivations and the financial consequences.This paper analyzes the motivation of the private equity placement from the external environment and inter of the company and innovatively proposes scale driven, corporate governance driven, risk driven and performance driven as the motivation of the private equity placement, then extracts the corresponding financial indicators for empirical analysis. The financial consequence of the private equity placement in this article is divided into short-term shareholder wealth effects and financial performance, by establishing regression model with the motivation of private placement and financial performance and the regression model with the motivation of private placement and shareholders’ wealth effect to conduct the empirical study. The research results show that in the scale-driven China’s listed companies choosing private equity placement with certain blindness, reflected the private equity placement as a financing tool, no reasonable planning for the use of the raise funds of the private placement. Corporate governance factors enhances the value of the company after the private placement, short-term shareholder wealth effects and financial results are significantly positive. In risk-driven company’s short-term shareholder wealth effect is not obvious, the long-term performance is not very optimistic, market investors have a certain resistance to the listed companies with a high degree of business risk, displaying risk aversion preferences. In performance-driven the company’s short-term shareholder wealth effect is positive and it has a positive impact on long-term performance.It has a strong role in promoting the development of high-speed growth companies, so private placement activity is warmly welcomed by high growth company.