Private Placement, Assets-Injecting And Majority_Shareholders Invasion

Stock-liquidity reform has resolved the capital market’s endogenous and institutional deficiencies of our country. Different kinds of shareholders’interests begin to reach unanimity. However, due to the impact of a series of factors such as culture, institution, legal environment, and the none fundamentally resolved problem of structural defect of single-large shareholder, Majority shareholders’invasion of small and medium sized shareholders’benefits still exist in practice after the ending of this reform., but more subtle and complex. It is more likely to breed the majority shareholders’benefit invasion in the event of listed companies’private placement and majority shareholders’assets-injecting theoretically, for this is a double related transaction in the course of buying and selling.This paper uses normative methods, empirical methods and comparative analysis to research the majority shareholders’invasion of small and medium sized shareholders’benefits in the event of private placement and assets-injecting.The main research work and brief conclusions of this paper are as follows:(1) Test the quality of majority shareholders’injected assets by empirical research:Use the methods of single index analysis, comprehensive performance analysis, partnership samples comparison and multiple regression analysis by taking the comprehensive performance marks as origin variable, all the results state that the medium and long performance of the injected assets is not good, the assets are not high quality.(2) Compare the injected assets’revaluation rate, which calculated all by manual, with the industry average, discover that the rate is generally above the industry average level.(3) Test the existence of earning management behaviors before or after the events:description statistics, partnership sample comparison and multiple regression analysis all demonstrate that there exists earning managements in the event of private placement, and it is more outstanding in bull market:there is negative management before the event and positive management after the event. Then attribute the positive performance to the injected assets which is really low quality confirmed in the chapter four.(4) Test the rationality of price in the private placement:discover the price is generally lower than the intrinsic value by comparing the price per share with the intrinsic value per share; By calculating and comparing the discount, this paper also discovers that the discount is the highest when the object is majority shareholders and their pay form is non-cash assets, and the average discount is also higher than some foreign countries.(5) Test the existence of timing in the private placement and whether it harm the benefit of the small and medium sized shareholders. The results demonstrate that the lower the base price minus the intrinsic price is, the probability is higher that the majority shareholders to inject assets. The regression analysis also demonstrates the larger of the deviation of base price with intrinsic price is, the more the majority shareholders private benefits are, but the worse the company’s performance is. This states that the majority shareholders’timing behavior really harms others’benefits.(6) Based on the above cases, finally this paper tests the economic results of assets-inject in private placement and discover that majority shareholders obtain abnormal benefits through the event but the benefits aren’t in conformity with the real performance, And the cases discussed above are all the directly influencing factors of majority shareholders abnormal benefits. All the results obtained in this chapter suggest again that there exists majority shareholders invasion and the above research results are reliable. Additionally, this paper discovers that the market’s response to the circulation of restricted stock is negative.This paper matches detail cases to each majority shareholders’ invasion behavior. Finally, this paper puts forward suggestions catering to the background of past-reform and full circulation period to protect the small and medium sized shareholders benefits from three aspects: corporate governance, law protection, stock market supervision.The main conclusion of this paper is:There is majority shareholders’ invasion in the course of assets-injecting and private placement. But this is not a common phenomenon. Through the comparison study, It shows that the invasion is more universal in the case when the stock is issuing to the majority shareholders and they pay by non-cash assets, especially in the bull market. Maybe this is a rather Chinese phenomenon and should be illustrated on the special system background of China.This paper’s innovations or new findings are:(1)Be different from foreign countries’private placement which is aimed to financing purely and mostly paid by cash, China’s listed companies are used to purchase by assets. So this paper focuses on the assets-injecting part in private placement according to China’s condition, and calculates comprehensive performance score to observe companies’medium and long term performance after assets-injecting, calculates abnormal value increase rate to observe whether majority shareholders have obtain more shares by overrating the value of the injected assets.(2)This paper tests the medium and long-term performance of the injected assets to analyze the quality. It takes times to integrate injected assets with listed companies’assets. The performance show may be postponed. So the medium and long term performance will be more objective.(3) This paper consults F-O model to calculate intrinsic value per share, and compare it with the price of private placement to see whether it is reasonable. It can avoid the serious impact of stock market’s volatility and fragility when this paper takes intrinsic value per share as the comparative standard, especially the dramatic impact brought by the global financial crisis in the end of2007.(4) Market timing theory is applied to private placement financing. It is used to analyze majority shareholders’decision-making choice on the events of private placement and assets-injecting and payment form.