Empirical Research On Equity Refinancing And The Operational Performance Of China's Public Companies

Modern finance theories state that the operational objective of a firm is to realize the maximum value of the firm. To maintain a reasonable capital structure, firms usually refinance in an inside equity refinancing - debt refinancing - outside equity refinancing order. In our country, split share structure, company governance disorder, backwardness of supervising measures and so on make that the listed companies'pose a low efficiency in using funds that collected through equity refinancing(ER), and they prefer to ER universally. The immediate reason for the preference of ER in the listed companies lies at the recessive income through tunneling that conducted and obtained by the big shareholders but not the small ones and internal control problems as well. Though there are a great many literatures which state the"low cost"of ER which includes Right Issuing, Seasoned Equity Offering and Convertible Bonds. Theoretically speaking, this will enhance the operational performances of the public companies. This dissertation puts a positive analysis over the sample listed companies that conducted ER in 2002, 2003 and 2004 with the method of trend analysis. The result makes it known that the overall performance does come down, the"low cost"of ER did not enhance the performances of the sample companies, furthermore, it deteriorated them.Using the data of cumulative abnormal return in five days since the right issuing and second equity offerings are conducted and relative long-term index as well, the statistical description finds that right issuing behaves a bit better than the latter one and shows highly evidently after T-testing. Besides, together with model, under the circumstances of right issuing and seasoned equity offerings, this paper also finds that market reaction and long-term financial performances shows tightly with the proportion of the non-tradable shareholders. The lying reason for the low-efficiency in using the funds that collected through ER and preference of ER is the drawback of institution like split share structure, resulting in the lying opposition of benefit between the tradable share holders and non-tradable share holders. The listed companies are under the powerful control of the big shareholders and internals, the paper analyses that the capital obtained through equity refinancing wasn't fully imposed to what it should be, but others (something like serving for the special purpose of big stockholders and for the benefit of managers). At present, domestic scholars'conclusions on equity refinancing vary from different perspectives. And only a minority of the scholars considers the factor of the split share structure. The researches do not give positive analysis over the relationship between the refinancing efficiencies and the split share structure. Since the beginning of 2006, the share mergers reform has launched violently. Though the effect of the reform is not yet nailed down, research on the equity refinancing of China's listed companies from this angle will help understand the problem in essence. Together with the latest data of the listed companies that conducted ER after share mergers reform, this paper finds that the market's short-term reaction behaves better than before. This paper tries to link the dissertation and the macro circumstances; hence, this paper put forward corresponding suggestion as follows: first of all, the basic approach to solve the low-efficiency in using funds that collected through equity refinancing is to settle the problem of split share structure. Secondly, we should strengthen the power of supervising the listed companies and protect the legal interest of small shareholders. Besides, the way the government plays a role correctly and the equity incentive mechanism are indispensable. Contrary to the current views, the dissertation oppose to heighten the barrier of EQ, for there exists a possibility that this results in list companies'earnings manipulation and market seeking rents behaviors. What should be done is that we should persist in marketing, meanwhile, further perfect the laws and regulations, intensify subsequent supervising, thus, model a fair-play market circumstances could be ensured.