Research On The Preference And Market Reaction Of Institutional Investors’ Participation In Private Placement Tan Peiwen

Private placement refers to the behavior of listed company to raise its shares to a certain number of qualified investors.It has become one of the mainstream models of equity refinancing for listed companies in China.At present,most of the academic research focuses on the announcement effect,the phenomenon of interest transfer of large shareholders,and the pricing of issue,but there are few studies on the long-term market response.Institutional investors,who are also the company’s stakeholders,why they participate in private placement,what is the role of different types of institutional investors in the private placement,remains to be further discussed.This paper selects listed companies in the A-share market of Shenzhen and Shanghai stock markets from January 1,2010 to December 31,2016 as research samples,selecting the institutional investors as research object,dividing the excess return rate into short-term excess return rate and long-term excess return rate.The 1-year locking period is divided into financial institutional investors and non-financial institutional investors,the 3-year locking period is divided into major shareholders and related parties.This paper uses the event research method to systematically study the preference of different types of institutional investors participating in private placement and their impact on the company’s market response.The empirical research results of this paper show that:(1)Financial institutional investors prefer the absence of major shareholders,major shareholders buy in cash,additional financing for the project,low discount rate,the nature of the enterprise is state-owned enterprises,but non-financial institutional investors prefer major shareholders to purchase in assets;(2)The events of private placement have positive short-term market reaction and negative long-term market reaction;(3)In private placement,the more shares financial institutions investors and non-financial institutional investors have,the lower short-term and long-term excess returns,and the negative effects of financial institutional investors on long-term market reactions are statistically significant;(4)In private placements,the more share institutional investors have,the fewer share major shareholders have,and the lower discount rate;(5)Major shareholders may increase the discounted rate to transfer interest,and financial institution investors are negative to this phenomenon.The article concludes that:First,institutional investors participating in private placements are really concerned about the behavior of major shareholders,and they are concerned about the value of targeted private placement projects and the long-term value of targeted companies.In the early stages,institutional investors were long-term value investors.Second,the events of private placement have positive short-term market reaction and negative long-term market reaction.Institutional investors actively pursue high-growth company stocks in the early stages,raising short-term stock prices,but financial institutional investors do not play an active supervisory role as expected in long days.If the progress of the program is not smooth or has problems with cash flow will drag down the company’s performance and stock prices,it will bring the correction of stock price performance,which caused the long-term negative market reaction.Third,in the process of private placement,major shareholders have the possibility of increasing the discount rate for profit transfer,while institutional investors face relatively less information asymmetry,have more objective judgment for the private placement price,alleviating the phenomenon of shareholders’ tunneling.