Study On Controlling Shareholder's Interests And Preference On SEO

MM theory is the beginning of the study on capital structure.Corporate finance practice all follow the Pecking Order Theory in western capital market.Since there is stock market in our country,listed companies always have preference on IPO and SEO.And the market of SEO is as large as the one of IPO.Listed companies prefer seasoned equity offering to debt.Controlling shareholder nearly has all of the control rights because of the unreasonable ownership structure in our listed companies.Controlling shareholder usually transfers the wealth owned by listed company to parent company after SEO.As a result,other shareholders suffer losses.Reform of non-tradable shares has made our listed companies' ownership structure better than before.But it's still not the best.The Ping'an case made investors suspicious of SEO again in the year of 2008.The paper studies on how ownership structure and share liquidity structure influence SEO. There are 109 listed companies which had seasoned equity offering in my study.The study has found that listed companies prefer SEO when there is a controlling shareholder.However there are different influences in two parts of different liquidity of stocks structure.The study also has proved that parent company engrosses cash belong to listed company purposely by association bargains.However these association bargains have not improved the Tobin's Q.There will be some policy suggestions in the end of the paper.