Empirical Study On Private Equity Placements Financing Effects Of Listed Companies In China

From trying to resolve difficulties for State-owned enterprises to havingcompleted the work of the split share structure reform successfully, and from startingthe implementation of innovative private equity placements in2006, China’s capitalmarket had, for over two decades, played an important role in many ways, such asaggregating social idle funds, facilitating economic reform, optimizing the allocation ofresources, promoting economic development, expanding employment, raising revenueand promoting social progress. With the development of market economy, China, as anemerging capital market, must explore its own way of development other than copy theother countries’ experience.To respond to the State Council’s call of improving the quality of listed companies,China Securities Regulatory Commission promulgated and implemented “Issuance ofSecurities of Listed Companies” on May8,2006. The private equity placements, hence,was introduced to China’s capital markets as a form of equity refinancing for the firsttime. Under our country’s special system, the private equity placements borrowed fromthe overseas market in full circulation background were being sought after by anincreasing number of listed companies. Its financing scale was far more than manyequity refinancing ways, such as public offering, right offering and convertiblecorporate bond issuing.A series of empirical studies on long-term and short-term effects of the privateequity placements were done based on relevant theories with a combination of casestudy in the dissertation to verify whether private equity placements played a role inoptimizing the allocation of resources, and promoting the development of listedcompanies. The research enriched the theory of private equity placements, and willprovide Chinese listed companies’ and investors with references for financing andrefinancing decisions, and also offer basis for improvements and specification ofprivate placement policy.The conclusions of this study and innovation were mainly reflected in thefollowing aspects:(1) An empirical study on short-term announcement effect of private equityplacements was done by means of even study through selecting a private equity placements plan announcement date and an implementation plan announcement date asthe event reference date. The results showed that there was a positive short-termannouncement effect in China’s private equity placements.（2）Since China’s private equity placements was introduced after May2006, theremay be limits in the research of its long-term effects in terms of time span and samplesize. Hence, a more systematic study on short-term announcement effect and long-termfinancing effect was done in the dissertation on the basis of sufficient long period andadequate number of samples. The results showed that there was a positive short-termannouncement effect in private equity placements of listed companies, in the long run;however, the private equity placements performance had not been improvedsignificantly.(3) The importance of protecting the rights and interests of minority shareholderswas explained through legal and financial theory. It argued that the implementation ofthe system to protect investors by law is conducive to financial development andeconomic growth. It maintained that to control the major shareholders’ asset tunnelingto protect the interests of minority shareholders was the basic guarantee for the healthydevelopment of the capital market.