Study About Influencing Factors Of Pricing Discount In Private Placement Of Listed Companies In China

The first successful private placement happened in last century. At present, private placement has become the most important method to refinance. However, according to research results, many listed companies in China often intend low price, it means the private placement price is generally lower than the prevailing market price.This abnormal phenomenon may seriously affect the future development of listed companies, seriously disrupting the normal order of the Capital Stock Market. So this article is of high economic and social significanceIn this article, the author mainly uses standardized combination of empirical research methods. The author placed a linear regression model to study those influencing factors.This article is divided into six parts:the purpose and significance, research methods, the present research conclusion on influencing factors of private placement price discounts research, related theoretical analysis, empirical studies, research findings, policy recommendations and shortcomings.The first part is the introduction. In this part, author mainly introduces the purpose, background and methods of this article. With the advancing of stock right decentralized allot revolution, a growing number of listed companies plan to refinance. And more and more listed companies intend to utilize private placement to refinance. However, according to research results, many listed companies in China often prefer low price, it means the private placement price is generally lower than the prevailing market price. So we can study the affecting factors which may affect the pricing of private placement. And then we can effectively protect the legitimate economic interests of investors, avoid the actual controller of the controlling shareholder illegal behavior. The second part is literature review. In this section, the author reviewed the related foreign and domestic research conclusions, and then these research results were consolidated, induction and generalization.The third part is the features of institutional analysis and development, In this part, the author described the current regulations about the private placement.And then, the author reviewed the development process of private placement in our country, reviews the strengths and weaknesses of the system.The fourth part is the empirical study. In this paper, the author set five explanatory variables and two control variables. After screening, this article finally selected the 161 of 2007-2009 samples.The fifth part is the conclusion and recommendations. In this part, the author successfully put up with some conclusions according to the results of this article. Then, the author put forward some feasible suggestions according to the actual situation of China’s capital market.According to the results of empirical research, we had drawn the following conclusions:(1)The participation of institutional investors in private placement process can significantly increase private placement price, thus lowering the discount rate of private placement.(2)In the process of private placement, whether the lead underwriter is the top ten brokerage firms or not has not any impact on pricing.(3)Before private placement, the higher proportion of major shareholders holds, the lower price of private placement will be.(4)Given the margin between the proportion that the majority shareholder gains in the process of private placement and the proportion that the majority shareholder hold before the private placement, the bigger this margin is, t he higher the discount will be.(5) The implement of the regulation can be effective to avoid the low price of the private placement.Before the implementation of the regulation, the discount rate is higher.The author proposes the following suggestions:(1)Further clarify the definition of "pricing benchmark day " According to relevant regulations, the private placement price cannot be lower than 90% of the average price of the twenty trading day. The pricing benchmark day might be the date of the resolution、the date of the board announcement, the date of the general meeting and so on. Although China set so serious regulation, the specific implementation process is often not satisfying. So I suggested that pricing should be appropriate to shorten the base date and the actual time interval between the issuance date, we should select the date closer to the formal issuance of the price as the pricing benchmark, such as the formal issuance of not less than 90% of the average share price 10 trading days before.(2)Further strengthen the impact of institutional investors in the process of private placement.Because institutional investors are good at collecting information, and their employees are professional and of high personnel quality,so these institutional investors can always achieve better performance than small and medium investors. On the other hand, the participation of institutional investors must bring much influence to the present controlling shareholders of listed companies. Frankly speaking, this is particularly beneficial for the protection of the shareholders. Given the positive role the institutional investors played in private placement, we should strengthen the role that the institutional investors play in the process of private placement.The contribution of this article includes the following two aspects:(1)Most current study mainly focused on the analysis of the pricing of private placement discount rate factors. Some of the existing research on placement focused on private placement announcement effect, the long-term stock market reaction after the private placement and the problems related to the transfer of shareholder wealth, however, only a few of scientists are focusing on the affecting factors that may determine the price of the private placement stock. As a result, with the help of foreign scientists, this article put forward seven factors that might determine the price of the private placement.(2)This paper argues that weather the lead underwriter is the top ten or not has no significant effect on the discount rate.Many research results have shown that if credit underwriter employed by listed companies is of good reputation, the majority of investors will believe the listed companies. At the same time, the listed companies can take advantage of the trust of the investors and sell stock with a relatively low price in the process of private placement.