Market Reaction To Private Placements Announcement Of Listed Companies And Its Contributing Factors

The security private placement of public firm is a behavior of which public firms finance in 10 specific investors privately. Western researches on private placement of public firms was started by Wruck(1989). in which paper he studied the firm value of private placement firms in terms of equity ownership concentration. 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.Since the year of 2006, a fever of private placement by public firms had appeared in China’s stock market, and private placement becomes the most important measure to refinance and merger for public firms. The relevant researches on this are deep abroad but not perfect right now in our country, mainly qualitative analysis. This paper hopes to use the standard CAR method to study the market reaction and its factors of private placement from a complete perspective, in order to put forward reasonable proposals.This paper includes four parts:the first part describes the foreign and domestic literatures of equity private placement; the second part gives an overview of event study method and introduces the standard how we choose data;In third part, we use the standard CAR method to study the market reaction in the announcement day, find some factors that influence the announcement effect. Regarding these factors as independent variable, and abnormal return on announcement day as dependent variable, we establish a linear regression model. The last part is the conclusion and the expectations.