Long-term Performance And Analysis Of Private Placement In China

CSRC promulgated and implemented the "the issuance of securities of listed companies management approach" in May8,2006. The refinancing market functions quickly restored. Due to the advantanges such as low threshold of the private placement, the simple audit procedures, being easy to communicate with professional institutional investors, private placement gradually become important means of refinance and acquisition in China and become the current hot spots of China’s capital market. Western mature capital market of private placement is widely popular in the1990s. For example, the funds of private placement in US grew from$8.1billion in1990to$153.9billion in2000, and the funds are the important source for start-up enterprises, financially troubled business and the companies seeking acquisition financing.The event study was largely used by foreign academics to analyze the announcement effect of the private placement. The earliest study by Wruck(1989) concluded that there is a positive announcement effect and it generated the abnormal returns of4.5%per year. In the domestic aspects, Zhang Weidong(2008) also have come to the same result that the short-term announcement effect is positive. However, most of the research at home or abroad focused on the short-term announcement effect of stock price, pricing issues, the wealth effect, especially in China, because of the shorter time of implementation, few scholars have studied the long-term operating performance of the private placement. Therefore, this paper attempts to study the long-term operating performance of listed companies which implemented private placement and to combine financial performance and the capital market to prove that the domestic market is not an efficient market.Select12indicators reflecting the company’s profitability, solvency, operational capacity and development capacity. These indicators are from the listed companies which implemented private placement. Then adopt the factor analysis to analyze the performance of1year prior to the issuance and2years after the issuance to get the score of their performance. After that, this paper makes analysis according to the purchasers and the purpose of the issue to conclude that the companies had seen a drop in the long-term operating. Then use the event study method to compare the average stock price of1month after the unlock and issue price, and analyze the cause of the difference. Finally, summarize briefly the conclusion of the paper and make some suggestion.This paper includes the following sections:The first chapter is an introduction to mainly discuss the background of the current domestic and international private placement and writing ideas and methods. And sort out the summary of the theory of the course of development of the private placement and the research material. Chapter II is an overview of the theory and the characteristics of the development of the private placement. Explain why private placement have developed so fast and introduce the theoretical basis this paper’s views depend on. Chapter III we classify the samples by the purchasers and motives. The classification will provide a good basis for the analysis. Then point out the differences of private placement between China and United States to perfect the domestic system. In chapter IV, this paper makes empirical analysis, use factor analysis method to study the long-term operating performance, and analyze the performance of1year prior to the issuance and2years after the issuance to get the score of their performance, then compare the average stock price of1month after the unlock and issue price. In chapter V, this paper makes the conclusions and gives some policy suggestions.