A Research On The Choice Between Private Placement And Public Issuance Of Listed Companies In China

Equity refinancing is an important mode of financing after the IPO, choosing a different way of equity financing will not only affect the listed company’s cash flow, cost of capital and ownership structure, it also affect the efficiency of the stock market and the investors’interests, so the selection of equity financing mode worth our attention and study. Accompany with the development of Chinese capital market, the way of equity refinancing become diverse, There have been "Placement Boom"," Public Issuance Boom " and " Private Placement Boom" in the history. Especially in2006, Share Segregation Reform was successfully completed, stock market liquidity was greatly enhanced, the number of listed companies which carried out the issuance of new shares was growing, thus, more and more listed the company has taken the way of private placement.However, why so many listed companies tend to choose private placement rather than public issuance? And how the listed companies choose the object in the private placement? These are the problems worth exploring in the corporate finance. In this paper, based on the results of the theory and empirical research on domestic private placement and public issuance, summarized the status of Chinese A-share market, we explored the reasons which would influence listed companies choose different modes of equity refinancing, and analysis the objects of private placement in the further research.In this paper we generalize the reason why listed companies choose private placement or public issuance into external factors and internal factors.We summarized the internal factors as control structure and information asymmetry, and thus we took empirical analysis on the internal factors which used the latest data.We found that control structure and information asymmetry both affect the issuance modes, and also affect the choose of the object in the private placement, but they influenced in different degrees. When the listed companies make a choice between private placement and public issuance, information asymmetry is the main factor. When the information asymmetry is worse, listed companies more inclined to choose the private placement. When select the object in the private placement, the control structure is the main factor. Weaker control of the major shareholders of listed companies prefer issuing new shares to its own major shareholders. And through the study of the equity nature,we found that state-owned companies are more inclined to choose private placement and often issue to large shareholders. The paper is divided into the following five parts:The first part is an introduction, including the description of the background, meaning and idea of this paper, and related literature were reviewed, summarized the main point of domestic and foreign scholars.The second part is the comparison of the distribution system and the status of the equity refinancing. By comparing the distribution system, we found that placement has some institutional advantages. Private placement has lower requirements, more simple operation and more efficient,. Through the analysis of the issuance status,we found that the private placement is the main way of the equity refinancing,both the private placement and the public issuance are concentrated distributed in the manufacturing industry.The institutional investors and major shareholder are the main object of the issuance in the private placement.The third part is the theoretical analysis about the reason why listed companies choose public issuance and private placement.First we introduced the explanation of choosing public issuance, including the cost of regulation theory, hypothesis and underwriters fair distribution costs hypothesis; we also introduced the explanation of choosing private placement, including monitoring hypothesis, the hypothesis of asymmetric information and management defense hypothesis; Then based on the background of Chinese equity refinancing market,we offered some factors that may influence the choice of refinancing modes from inside and outside of the company.The fourth part is the empirical analysis. We collected the latest data from2009to2012, and used Logistic model, analyzed the impact of the control structure and information asymmetry on the choice between private placement and public issuance.Furthermore, we analyzed the reason of the object selection in the private placement from the factors of control structure and information asymmetry.The fifth part is the research conclusions and policy recommendations. First we summarized the different factors on SEOs mode selection and the object selection in the private placement. Secondly, based on the conclusions, we offered some suggestions for the listed companies and the regulators...