Long-run Stock Price Performance Following Private Placement Of Chinese Listed Companies

The academia research of long-run performance following Seasoned Equity Offerings(SEO) on the capital market has been very important, because it directly related to theinterests of investors and market value of these listed companies. There are many ways offinancing that listed companies can choose, such as public offerings, bond and bank loans.However, private placement is only used in recent years, and because of its low cost, lessrequirements, within a few years private placement has become one of the most popular listedcompanies financing means. Therefore, it has great significance to research the marketperformance after private placement of listed companies, not only can protect investors’interests and maintain order in the capital market, but also can help to standard the laws andregulations about Chinese listed companies’ seasoned equity offerings.Foreign scholars have more mature research system and research findings on privateplacement than Chinese scholars, according to the studies by foreign scholars, public firmsthat place equity privately experience positive announcements effects, with negativepost-announcement stock-price performance. Private placement show up until May2006inour country, because of limited sample period, only the changes of the year, most scholars areconcentrated in the issuance of short-term performance, only a few studies focus on thelong-run market performance,. In view of this, the Chinese listed companies’ three-yearlong-run performance after private placement ia the focus of this study, and will explore theimpact factors of long-term market performance of listed companies.This article use theoretical explanations, empirical research, analysis, etc. First, tocompute the long-term stock-price performance of listed companies use four control groups,conduct an empirical analysis and found that although the raw return is gradually rising, theystill had negative post-announcement stock-price performance to compare with the fourcontrol group. Second, the for factors which impact on long-term performance of listedcompanies were analyzed, obtained that financial condition and ability to grow before theissuance of companies have significant negative impact, and its outside investors identityhave a significant positive impact. These results show that in Chinese capital market, privateplacement process meets the window opportunity hypothesis and the monitoring hypothesis.