A Study On The Market Reaction To The Alteration Of Finacing Capital’s Use From The Listed Companies

In recent years, listed companies alter financing capital’s use more frequently. Use offinancing capital and its effect are important aspects to measure companies’ operation qualityand level of management. Alteration of financing capital’s use is not only related to theefficiency of funds, and has an important impact on development. So people always payattention to this behavior. At present, there are two different kinds of opinions on listedcompanies’ alteration behavior: one is to get money bad will, which are "bad" motives;another kind is responsible for investors, which are “good” motives. When it comes toChina’s Listed companies alter financing capital’s use, we should talk about Project stockfinancing system. In this system, companies should have investment projects that thegovernment approval if they want to raise funds by issuance of shares. So companies alwayschoose projects that most likely through the government approval. However, with the end ofthe process, the role of government is gradually abated, and the role of the market graduallystrengthened. In order to meet the requirements for enterprise development and change withthe market, it is necessary for companies to make some adjustments. But what opinionsinvestors have on this phenomenon? To answer this question can help us understand listedcompanies’ alteration behavior.The paper uses both theoretical and empirical to study the issue. It begins with theanalysis of phenomena that the listed companies altered financing capital’s use, summarizesgeneral characteristics and new usages of this behavior, points out the deep reasons of thesephenomena and inspects the influence by using relevant accounting index rates of change.Then, we use some related theories of information economics to analyze market’s reaction tothis alteration. When listed companies alter financing capital’s use, the stock market transfersthis information by announcements. In the Efficient market, stocks’ price can reflect theinformation of alteration, which means that alteration of financing capital’s use impactsstocks’ price. At the same time, the existence of the principal-agent relationship leads to listedcompanies and investors have asymmetry information. Investors can not judge the quality of announcements, so they evaluate each change events by an average level of allannouncements. In this case, companies that quality improves are underestimated, their shareprices down; companies that quality improves are overestimated, their share prices up.Theoretically, we get the conclusion that announcements of listed companies will influencestock market, while, the impact of direction depends on the market efficiency and the degreeof information asymmetry. And then, on the base of the Capital Asset Pricing Model（CAPM）theory, we select110“A” shares listed companies which altered financing capitalfrom Shanghai Stock Exchange, from2010to2011, as samples, using event research methodempirically analyze the market conductibility of the alteration of financing capital’s use. Bygetting average abnormal return and cumulative average returns to analyze market reaction toalteration of financing capital’s use.The results show that the number of the listed companies altered financing capital’s hasdeclined; The net amount in a low proportion; The reason of alteration is more in order toadapt to market environment and industrial policies; On average, altered financing capital’suse can improve listed companies business performances, this alteration can create value andwealth. The empirical results show that the fluctuating of samples’ Average Abnormal Returnduring the window[-15，15]are not distinct as well as that of cumulative average AbnormalReturn. So the announcement of alteration of financing capital’s use can transfer valuableinformation. Obviously, the empirical results support the theoretic conclusion. And thecumulative average abnormal return is positive，it means that alteration announcementsimproves stocks’ price, investors do not in adverse selection. Paper finally gives some adviceto enterprises, investors and government. That is: Improving corporate governance of listedcompanies; strengthening investment mind of investors; intensifying supervision.