Influential Factors For Private Placement In Chinese Listed Company

Since China Securities Regulatory Commission issued the Measuresfor the Administration of Securities Issuance in May6,2006, privateplacement has become the preferred method of seasoned offering of listedcompanies in China because of the advantage of low threshold and simpleprocedures.This study shows that Chinese listed Company will carry on earningsmanagement during the private placement. The direction of the earningsmanagement depends on the offering targets. When the offering targetsare outside investors, the listed company will do upward earningsmanagement. When the offering targets are controlling shareholder andits related parties, the listed company will do downward earningsmanagement. When the offering targets are both of above, the earningsmanagement is not significant.This study also shows that, the level of earnings management relatesto corporate governance and external monitoring of the listed company.When the offering targets are outside investors, if the company is statecontrolled or has an absolutely controlling shareholder, the level of upward earnings management is low. When the offering targets arecontrolling shareholder and its related parties, if company has a highshareholding percentage of institutional investors or has an absolutelycontrolling shareholder, the level of downward earnings management islow.