An Empirical Study On Private Placement And Asset Injection In Terms Of Tunneling And Propping

With the completion of share-split reform,the full circulation era is approaching,and large shareholders are interested in mjecting assets into listed companies throughprivate placement．Nowadays,private placement and asset injection is popular andtakesmuch attention．Large shareholders will tunnel the listed companies in the way ofrelated party transactions in the view ofproxy and tunneling theory when ownership concentration is high,While large shareholders will prop the bad listed companies inthe view of propping theory．Due to the dominance of large shareholders,andincomplete rules and regulations fur private placement and asset injection,tunnelingtends to be prevalent．This paper develops a theory model based on proxy,tunneling and proppingtheory．The model indicates that large shareholders will tunnel listed companies by depress the placement price and overestimate assets'value,while prop listed companies by inject good assets．Also,this paper develops 3 hypotheses about short-term and long-term performance of listed companies．Furthermore,this Paperselects 61 samples ofprivate placement and asset injection from January 1,2006 toJune 30,2008,uses the event study method,principal component analysis andregression,and gets several significant and interesting conclusions．First of all,in short-term,the market is in favor ofprivate placement and assetinjection,and the shareholders,as well as minority shareholders get significant positive abnormal return．Second,in long-term,the market performance of listed companieswhich havetaken private placementand assetinjectionisworse significantly,whichmeans that the minority shareholders lose jn long-term．Third,in long-term,thefinancial performance of sample doesn't improve,while companies whose ROE isbetterbeforeprivateplacementandasset injection suffermorelater．Lastbutnotleast,the priceinwhichmajor shareholders sellthe sharesismuchhigherthanthe privateplacement price,major shareholders realize the return of ttmneling through stockreductionanddividends．Duetoinsufficient protection ofminority shareholders,large shareholders preferto tunnel listed companies in the process of private placement and asset injection,andproppingis opportunistic．This Paper resolves the argument that major shareholders are tunneling／propping listed companies when private placement and asset injectionhappens,and gettheways of tunneling in the perspective of theoretical and empiricalanalysis．This paper is instructional and helpful for investors and regulatory authority．...