Empirical Study On Impacts Of Private Offerings On Corporate Performance After The Split Share Reform

In the institutional point of view, implementation of the split share reform helps to reduce large shareholders'incentives of propping from listed companies and interests of small shareholders, while also has a great influence on large shareholders'pattern of behavior. After the split share reform, both large and small shareholders have the same incentive to support the listed company so that they can achieve the highest return on investment from the stock price appreciation.This paper focuses on the refinancing method called―private offering‖to see if large shareholders'support incentives are demonstrated in the event of―private offering‖. Based on the literature review on the relationship between―private offering‖and corporate performance, this paper puts forward the following hypotheses:(1) The announcement of―Private Offering of Shares‖has significantly positive―Announcement Effect‖in the stock price, which means that abnormal return during the event window is significantly above 0, including Average Abnormal Return(AAR) and Cumulated Abnormal Return(CAR).(2) The event of―Private Offering of Shares‖stimulates the long-term operating performance, which means that overall fiscal operating performances of the listed companies have improved in the following years after―Private Offering of Shares‖.The above two hypotheses make the core empirical parts of this paper. The first empirical part about the short-term―Announcement Effect‖of the stock price adopts the method of―Event Research‖, also with―Univariate T-test‖. The second empirical part adopts―Factor Analysis‖to test if―Private Offering of Shares‖has influences on long-term operating performances of listed companies.The empirical results show that―Private Offering of Shares‖has significant positive―Announcement Effect‖on the short-term stock price, which is more obvious in time windows before the announcement of―Private Offering‖. Meanwhile, large shareholders characteristics also make a difference on―Announcement Effect‖, which is more obvious when large shareholders hold less than 50% of shares and when large shareholders hold totally outstanding shares.The second empirical part focuses on the impacts of―Private offering‖on the long-term operating performances by the method of―Factor Analysis‖, which shows insignificant influences on the long-term performances in the following fiscal years after announcements of―Private offering‖. The possible explanation may be the fact that large shareholders'supporting incentives don't play a determent role in the long-term performance of listed companies. Besides, companies which initiated private offerings in 2008 have showed significant improved performances in the following fiscal years, which can be explained from the large shareholders'support during periods of difficulty. This conclusion is consistent with Simon Johnson, etc. (1999) conclusions in their working paper‖Corporate Governance in the Asian Financial Crisis‖.According to the above results, this paper puts forward the following suggestions including (1) Strengthen regulations on the stock market (2) Improve the system of―Information Disclosure‖(3) Intensify investment education for small investors (4)Promote implementations of the systematic protections for small investors.