Study On Seasoned Equity Offering Market Timing Effect Of Listed Companies

According to the classic MM theory, a company's choice of a capital structure does not affect its value given certain assumptions. Although subsequent study have modified the MM theory by relaxing some of the assumptions, they have not given up the assumption of Efficient Market. Recent years, with the development of behavior finance theory, many scholars began to research the effect of capital market environment on the finance activities and capital structure from a new perspective. They believed that corporate finance behavior really exisits the market timing effect.And this research is especially important in China, because there exists regulation on security issue in China, which is different from western countries. In order to supervise the refinancing behaviors of listed companies in China, the relevant department published many strict supervision policies on SEO and changed them from time to time. Therefore, the impact of market condition on corporate refinancing not only depends on stock price, but also regulation rules. Therefore, this paper attempts to take the equity refinancing of Chinese A stock market as study object, using domestic and foreign research results as reference, combining with supervision policies and regulation in Chinese capital market, and examine the market timing effect and its impact on capital structure of listed companies.This paper includes five parts. The first one is an introduction, mainly giving the research background and objective, defining relevant concept, and listing the structer of this paper. The second part is the literature review, including capital structer theory and behavior corporate finance theory, and the summary of the foriegn and domestic research about market timing theory. The third part is about the research design. It specifies the data sources and sample seletion, and identify the research variables and research method. This paper defines SEO firms in hot market as market maker. The forth part is the results and analysis of the empirical research. First of all, it tests the market timing effect based on the entire sample. Because of rights offering and additional offering are restricted by different policies, it separate the sample into rights offering and additional offering. In order to tests the impact of policy variables on the finance behaviors, it add SEO policy variables later. Lastly, it exams market timing effects on capital structure. The Fifth part is the conclution of the resaerch and the enlightenment in this paper.The empirical results indicate that market timing effect was significant on SEO in Chinese market, and it was highly correlated with the issuing size of seasoned equity offerings. However, this market timing effcet is not caused by the investment demand after SEO. And the effect of market timing was not only based on stock price, but also based on regulation policies. We also found the market timing effect on corporate capital structure was temporary.