| Based on the private placement sample from May18th2006to December31th2010in China stock market, this paper first study the influence factors of private placements (PPs) discount in China stock market. We find that, the large shareholder’s opportunistic behavior is the key to the private placement discount. And the private placement discount level and the large shareholder’s prescribe rate both together determine the wealth that the large shareholder transfer from the listed companies. The higher percentage of the large shareholder prescribes, the higher the discount, and the stronger motivation of tunneling. What’s more, the higher the difference between the prescribe percentage of large shareholder and their holding percentage, the higher the discount. These indicate that private equity placement may be one way of tunneling for large shareholder. But these only exist when the stock market is blooming. That is, only then can the large shareholder and relevant shareholder realize tunneling by high discount of private equity placement to them. Consistent with previous research, discount in private placement is also positively related to information asymmetry, that is when the information asymmetry is severe, the discount is higher.Then we use event study method to study the long-term market performance of the private placement, and the result show that the long-term cumulative abnormal return (CAR) of private placement is positive, and the long-term market performance and accounting performance of private placement to associated shareholders are higher than those of private placement to non-associated shareholders. And the long-term market performance and accounting performance of the assets-subscribed private placement sample group is higher than the cash-subscribed private placement sample group. So the theory of information asymmetry can well explain the private placement phenomenon in China stock market. |
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