Directional Increase Engine Of China's Listed Companies And Consequences

Since the development of the securities market in China, listed companies used to refinance through several public offering methods like additional issues, rights issues and convertible bonds. Until the reformation of stock market beginning from 2005, especially the implementation of the new policy of "Management of listed companies to issue securities", China's securities market changed definitely and it began to form a full circulation environment. And then, the targeted additional issuing, a new method of refinancing with the advantage of "One Simple Three Low", became the preferred mean of refinancing to China listed companies.From January 2006 to March 2008, it reports there have total 230 China listed companies refinanced successfully and raised fund 431.36 billion Ruan through the method of targeted additional issuing, accounting for 90% of the total refinancing fund raised in the market. In this paper, the major purpose is to find out motivations and consequences related to the method of the targeted additional issuing. After research and study, the paper indicated both subjective and objective factors impelling to the prevalence of the targeted additional issuing. The paper summarized some common motivations, such as fund raising, excellent assets M&A to be listed as a whole and strategic investors introduction, among all different participants including listed companies, large shareholders, strategic investors and institutional investors. But on the other side, it does not rule out some bad purpose like to seek money, sell inferior assets or monopolize. Meanwhile, the paper also found that the consequences of the targeted additional issuing is generally positive, it is favorable to the participated investors, the company business, the company financial situation and the stock market. The consequence of the targeted additional issuing depends on three key factors to a large extent, which are participants, motivation and issuing price. In addition, the paper proved that the large shareholders is the most key factor to impact both issuing price and consequence of the targeted additional issuing, and it also verified that two kinds of motivation of excellent asset M&A and strategic partners introduction lead to the most favorable to listed company's performance enhancing.