Event Studies In Announcement Effect Of Private Placement In China

Phase's success was achieved on 8 May 2006, and the financing function of the stock market was restored. Private placement was introduced into China at this time. Recently, private placement became the desirable choice of listed company and it is very popular to investors. Meanwhile, private placement has been one of the hotspots of the stock market. How to analyze private placement scheme is a very imminent problem and task for investors. There have been many scholars who launched the research in private placement, but mostly analysis lack the data to support.This paper is an empirical research on the market reaction to private placement and the underlying reasons in Chinese share market, based on the methodology of "Event Study". Chapter 1 introduces the background and relative papers; Chapter 2 introduces the development and practice about the private placement in China. Chapter 3 reviews some theories about Event Study method and some statistical test methods. Chapter 4 makes some empirical studies, gives some analysis and draws some compared conclusions; Chapter 5 gives some explains and several policy suggestions.Choosing 134 stocks of listed corporations involved in the private placement as the sample, this paper analyzes the fluctuations of cumulative abnormal returns and abnormal returns resulted by the announcement effect of the placement. It is proved that private placement caused significant positive abnormal returns and cumulative abnormal returns on announcement days. Especially in the days before the event date, the investors can get positive abnormal returns significantly different from zero, which implies insider trading activities during days before the announce date. Further more, statistical test indicates that there is significant difference between the announcement effects caused by the placements with different issue targets. The effects of the companies whose issue targets include major shareholders are more significant. Meanwhile the investors are not that sensitive to what the major shareholders pay for the shares they subscribe. When it comes to placements in different trends, there is no significant statistically meaningful discrepancy in the announcement effect. At last, according to research conclusions, this paper gives some suggestions.