A Research On The Seasoned Equity Offering Flotation Methods Choice Of Chinese Listed Companies

Seasoned equity offerings (SEO) is related to the company's cost of capital, capital structure, cash flow arrangement and control structure from the micro level, related to capital allocation efficiency and the interests of investors from macro point of view, with the development of Chinese capital market, SEO of listed companies become more important. The financing amount of SEO is close to IPO; SEO has become an important way of follow-up financing. The research of scholars about SEO at home and abroad gives a great sense of inspiration for writing this dissertation, allowing the author to carry out an integrated and extended analysis on the results of previous literatures. This dissertation does research on SEO flotation methods choice. This will be more significant and practical in China.At the same time, there are relatively small literatures from the perspective of SEO consequence to flotation methods choice, so as a starting point; this dissertation does research on three major SEO flotation methods in China, that is, share placements, public offerings and private placement. We hope that listed companies can conduct SEO behavior according to rational choice and evaluation, this may reduce the company's SEO costs, improve financial efficiency to achieve SEO goals and enhance the company's market value.This dissertation intends to follow the thinking of "Research background→Literature Review→Analysis of influencing factors (including the theoretical model and empirical test)→announcement effect comparison→long-term market performance comparison→Conclusions and policy recommendations". The main contents include SEO flotation methods; SEO announcement effect and long-term market performance, combining the theory of information asymmetry and wealth redistribution effects with SEO flotation methods choice based on Chinese capital market and listed companies. This dissertation integrates classical theory of capital structure, explores cutting-edge issues of SEO, and uses the game theory to analyze SEO regulatory policies, uses Logistic model to analyze influencing factors about flotation methods choice, company size, binary ownership structure and other factors are included in the empirical test. We use event study to examine announcement effects and long-term market performance of share placements, public offerings and private placement, and then we compare the short-term and long-term performance of the three kinds of flotation methods. There are eight chapters in this dissertation.Chapter 1 focuses primarily on the research background and research significance, research content, research methods, and structural arrangements.In Chapter 2, we review literatures from the SEO flotation methods choice, SEO announcement effect, and SEO long-term market performance at home and abroad, and then we raised main issues in our research.Chapter 3 describes the theories about SEO and SEO flotation methods choice, the theories support for share placements, public offerings and private placement respectively. From the view of institutional context in China, the theory of asymmetric information and wealth redistribution effect are instructive.Chapter 4 analyzes SEO institutional context of listed companies in China, introduces characteristics and development of share placements, public offerings and private placement, recalling the policy change of the three kinds of SEO flotation methods, and uses the gap model of the game method to analyze public offerings policy. Consequences show that regulatory policies have significant impact on performance of listed companies; public offerings policy induces public offerings qualification line, regulatory policies lead to information distortion, which also shows that there is no significant difference about ROE among the share placements companies, public offerings companies and private placement companies, though regulatory policies pay attention to ROE. Listed companies will do at all costs to meet the regulatory requirements in order to obtain SEO qualification, losing the reason to choose SEO methods.Chapter 5 discusses influencing factors of SEO flotation methods choice from the theoretical and empirical perspective. There are two theoretical models, the private benefits of control model and the redistribution of wealth effect model, the former discusses the private benefits of control effects to SEO decision-making and SEO flotation methods choice, the latter analyzes the interests of non-outstanding shareholders and the outstanding shareholders (in fact they are the controlling shareholders and minority shareholders) in share placements, public offerings and private placement. The analysis shows that the controlling shareholders increase the probability of SEO after considering private benefits of control, although SEO will reduce the interests of minority shareholders, in China, private benefits of control does not affect the controlling shareholders SEO flotation method choice decision-making of listed companies. The analysis also shows that in Chinese capital market, non-outstanding shareholders prefer to public offerings and private placement. However, non-outstanding shareholders sacrifice their interests in private placement to a certain extent, the interests of outstanding shareholders has been increased. After the two theoretical models, we use Logistic regression analysis to test empirically influencing factors of SEO flotation methods choice, the expected amount of SEO, total assets, ROE, the largest shareholder equity ratio, price-earnings ratio, the proportion of outstanding shares, asset-liability ratio, equity ratio of the top five shareholders and average growth rate of main business in the past three-year are included. We found that the greater the expected amount of SEO, asset-liability ratio, equity ratio of the top five shareholders, the proportion of the outstanding shares, the more companies inclined to adopt public offerings and private placement, the conclusion reacts the reform of non-outstanding shares.Chapter 6 examines announcement effect of share placements, public offerings and private placement, and compares the empirical findings in the use of event study. We use OLS market model to calculate the expected rate of return, the normal return is the estimated value of the particular trading day returns. The announcement effect of private placement for companies in China is better than public offerings's, and the announcement effect of public offerings is better than share placement's.Chapter 7 examines long-term market performance of share placements, public offerings and private placement, and compares the empirical findings in the use of event study. The long-term market performance of private placement for companies in China is better than public offerings's and share placement's. From the perspective of value maximization, private placement should be vigorously promoted; it is the best SEO method for Chinese listed companies.Chapter 8 summarizes the conclusions of this dissertation from policy research, theoretical research, empirical research and makes relevant policy recommendations, specifically including improving SEO regulatory policies, enhancing the SEO regulation of listed companies, improving the shareholding structure, encouraging private placement and so on.The SEO is a very rich research field, scholars at home and abroad have made a fruitful foundation, their research have a great sense of inspiration for writing this dissertation, this dissertation carries out an active exploration based on existing research, and there are three major innovations views: Firstly, the dissertation makes a comprehensive analysis about the development of share placements, public offerings and private placement, and reviews the policy changes about the three methods. The first time the author uses game theory to analyze public offerings qualification line, extending the research content.Secondly, the first time the dissertation uses Logistic model to analyze influencing factors of SEO flotation method choice, and examines empirically the differences of company's features among share placements, public offerings and private placement. The conclusions can give some guidance for Chinese listed companies.Thirdly, the existing literature on SEO flotation method choice is still inadequate; this dissertation is different from the previous research that analyzes the changes of SEO short-term and long-term performance from other points of view. We proceed to establish the relationship between SEO flotation methods choice and performance; we pay attention to how choices affect the performance and how to choose SEO methods through performance evaluation after SEO.Unfortunately, due to the late emergence of private placement, in comparing long-term market performance, we can only do research about 18 months, as time goes on and the number of samples increases, we can do research during even longer period in the future. Also, we can analyze the reason of announcement effect and long-term performance changes from theoretical view.