The Performance Of Private Placement In Shanghai And Shenzhen A Shares Listing Corporation

Since the non-tradable share reform in 2006, private placement is equity financing is an important way of China’s securities market. It is popular with China’s listed companies because of its review process is simple, low threshold, low-cost financing, issuing a high success rate and other characteristics. Because less than a decade the development of the private placement, related research is not abundant. Domestic scholars for placement performance findings are also controversial. Therefore, it is necessary for issues related to the private placement of an in-depth study. This paper attempts to combine theoretical and empirical analysis method to further explore the Chinese A-share market listed companies private placement economic and financial performance.In this paper, 214 listed companies in China’s share market which implemented the private placement between January 1, 2009 to December 31,2011 are chosen as the statistic samples, by using the Event study method, we fist examine the short-term price effect before and after the announcement of private placement within ten days. We verify that there is a significant positive short-term announcement effect in(-4,1) window. Then we examine the long-term share price performance after the issuance date of the private placement within three years. We found that in the(1,12) and(25,36) month window, the BHAR is on the rise, in(13,24) month window showed a downward trend. But the BHAR are greater than zero. Thus it can draw conclusions for the private placement of long-term positive effects of stock price.In addition, this paper also explored the relationship between the different features of private placement and long-term stock returns. Select the private placement object, purpose, financing scale, discount rate and subscription ratio of major shareholders as explanatory variables and the Buy-and-Hold Abnormal Returns as the dependent variable to establish a multiple linear regression model. We found that the long-term share price performance subscribed only by large shareholder and related shareholder in private placement is superior to the company’s share price performance subscribed by other investors. The sample firms’ long-term stock price performance of private placement with the acquisition of assets for the purpose is slightly better than that of project financing, assets to supplement directional placement, but was not statistically significant. In addition, the study also found that the scale of private placement, discount rate were significantly negative correlated to long-term Buy-and-Hold Abnormal Returns. Large shareholders’ subscription ratio of private placement is significantly positive correlated to long-term Buy-and-Hold Abnormal Returns.This article is also based on the total return on assets(ROA) for the financial indicators to study the sample company’s operating performance before and after the private placement within three years. The study found that one to two years before the private placement issuance, the company’s ROA sample showed a rising trend and peaked in the year of issuance, and after issuing consecutive year downward trend, and decreased after the release of ROA in the first year is particularly significant.Finally, aiming at the problems found in the study and research conclusion, this paper put forward the corresponding suggestions.