China's Listed Companies Issuing New Shares Announcement Effect And Influencing Factors

Since seasoned equity offering (SEO) was adopted in 1998, it has been getting popular rapidly and become an important way of equity refinancing for Chinese listed companies. However, compared with listed companies desired for SEO, investors feel repulsion for SEO increasingly, and share price in secondary market often falls with SEO announcement. How much is share price fluctuating resulted from SEO announcement? And which factors influenced share price?By using the methods of theoretical analysis and empirical analysis, this paper examines the impact of seasoned equity offering on shareholder wealth and identifies the relevant factors that explain the associated price reactions. At first, we review the foreign and domestic documents of seasoned equity offerings, and find some factors that influence the announcement effect. Regarding these factors as independent variable and abnormal return (AR) on announcement day as dependent variable, we establish a linear regression model. This paper documents significant negative announcement effects of seasoned equity offerings in China for the period 1999-2002. Then we examine the linear regression model. The multivariate regression results show growth opportunities, management holding stock proportion, circulating stock capital and stock market trend have significant positive effect on AR, and announcement year has significant negative effect on AR. Non-circulating stock proportion has insignificant negative effect on AR. In order to reflect the difference resulted from announcement year, this paper tests for every year sub-sample. We find the influencing factors are different as a result of SEO announcements of different years. At last, according to research conclusions, this paper gives some suggestions.