Empirical Study On Private Placement Refinancing Of Listed Firms In China

Western researches on private placement of public firms was started by Wruck(1989). He studied the firm value of private placement in terms of equity ownership. Then, Hertzel and Smith (1993) documented their viewpoint of asymmetric information to explain private placement of public firms. These two hypotheses then became the main explanations for the researches of private placement by public listed firms. In contrast, because of the lack of the data, the relevant research is not yet perfect in China. Based on the mass statistic, this paper makes a summarization and empirical study on the private placement in China.Based on the statistic, we analyzed the price performance and the industrial distribution of private placement firms, from which we found that a high discount following private placement and the speculation was excessive. Compared with American private market, we found that there is a misusing of private placement by public firms in China. Using event study method, we analyzed the price performance of the private placement and also made a deep research in industry. A positive announcement effect of private placement and a positive cumulative abnormal return were found after empirical study. And the effect of the private placement was various in different industries, due to the characteristics of the different industries. This paper also made empirical comparison between private placement and right offering, from which we got the similar points.However, due to the limitation of the event windows, the drawbacks of the event study method and the bull market period, the positive price performance of private placement firms and the long-run performance of private placement remain to be seen.This paper includes five parts: the first part describes the foreign and domestic literatures and study method; the second part gives an overview of the private placement and makes comparison between different SEOs; the third part does an empirical study in the performance of private placement in stock market; the fourth part makes an empirical comparison between private placement and right offering; the last part is the conclusion and the expectations.