The Research For Announcement Effect And Transfer Of Benefits Of Listed Companies In The Private Placement

The private placement is an important refinancing way that the listed companies issue new shares to specific investors such as the controlling shareholders, institutional investors so as to raise project funds. It has been more than seven years for the implementation of the private placement in China’s capital market so far. However, due to the defection of the governance structure of domestic listed companies and inadequate regulations (e.g., the fuzzy specification of the pricing basis, the issuance price of the benchmark stock "10%off provisions"), it is likely that some type of the transfer of benefits lies in the implementation process of the private placement:for the purpose of issuing new shares and the demands of maximizing their own interests, controlling shareholders have an incentive to manipulate stock prices in order to subscribe these new shares with a lower price. It is obviously that the latent transferring benefits of the controlling shareholders will damage other small shareholders’welfare.Targeting the information event of Board solution aimed at the private placement, we have manually collected almost all the samples since the implementation of the private placement in china’s stock market. In the paper, the methodology of classical event study has been applied for this empirical research on the potential benefit transferring in the process of private placement. This study found that:(1) Based on the whole sample, the cumulative abnormal returns of event window [-60,0] appear downward trend on the whole, suggesting that the target company’s share price has been deliberately suppressed before the issue of Board solution;(2) Based on the different sample classification, including additional issue only to controlling shareholder ("type I"), to institutional investors ("type II) and to controlling shareholder and institutional investors ("type III"), we found that the event window cumulative abnormal returns of the "type I" were significantly lower than other types. The evidence further manifests that the controlling shareholder tends to artificially suppressed the target company’s price in order to get a lower issue price. Moreover, we studied the market effects when the lifted stocks in the private placement began to circulating. We found that additional lifted premium rate received by the controlling shareholder is significantly higher than other institutional investors, which also suggests that there exist benefits transferring in the private placement.In a word, this study will not only help investors develop a kind of more effective investment strategy as to the private placement event, but also offer a useful reference for securities regulatory authorities about preventing the benefits transferring in the private placement.