Private Placement And Long-term Performance Of Company Stock And Performance

This paper gives a comprehensive and detailed analysis of the development trend of the private equity placement in China and carries out an in-depth research on performance of stocks and operations of the companies which implement private equity placements through a combination of qualitative and quantitative research methods. In the section about theoretical research and overview of private equity placement of China’s A-share market, the paper provides a comprehensive description and summary of the institutional background, history, current situation, characteristics and the comparison between private equity placement and other equity refinancing ways with the methods of qualitative and comparative research. In the empirical research section, the paper conducts in-depth research on the long term performance of companies after private equity placements. What’s more, the paper compares the operation performance of companies before and after private placement through ROA, ROE, EPS and net operating cash flow per share.According to the empirical research, the paper gets the following three conclusions: First, there are long-term positive excess returns of listed companies in China’s A-share market after the private equity placement, and the three-year operating performance before and after the private placement of listed companies were significantly better than that of control companies, which illustrate that investors underreact to information in China’s capital market. Second, the stock performance of the listed companies that large shareholders and its affiliated parties participate in the private equity placement is better than that of companies that large shareholders and its affiliated parties do not participate in, but the result is not statistically significant. And there is no significant difference between the two types of companies before and after the private equity placement on the results of operation performance. Third, the performance of the stock and operations after private equity placement when large shareholders subscribe stocks of private placement in non-cash assets are significantly better than the performance when large shareholders subscribe in cash. The performance of stocks and operations do not show a significant difference. According to the conclusions above, the paper argues that there is positive impact of private equity placement to the long-run performance of the stock and operations, therefore SAC should encourage listed companies to take private equity placement refinancing way and encourage listed companies which comply with the conditions to take the way of asset acquisition by private equity placement. Not only can it effectively reduce the related transactions and horizontal competition that may exist between the listed company and its affiliated parties, but also it is conducive to the healthy development and gradual improvement of China’s capital market.