Investor Sentiment、Market Timing And The Private Equity Placement Of Chinese Listed Firms

The equity division, a key character of China capital market, was the biggest barrierof China’s capital market. After the reform of the equity division, China’s capital marketwent into the ages of circulation. Many methods such as public offering, private equityplacement, right offering, and convertible corporate bond issuing can all be used by listedcompanies for financing. Among these financing methods, private equity placement hasbecome more and more popular. There are many different between private equityplacement and other financing methods in market-timing and issuing object. But nobodydo the job in china.Based on the angle of investor sentiment, using the behavioral finance theory, thispaper studies the private equity placement behavior of the listed corporation. Based on459private equity placement samples, this paper does a serial research works on the privateequity placement of the Chinese listed companies, including the choice between publicoffering and private placement, the sentiment of investors and the announcement effect ofthe private placement. Firstly, this paper constructs the China Investor SentimentComposite Index (CISCI), using the principal components analytic method, and hascompleted the consistency check, which has discovered that CISCI tallies highly with thesame time Shanghai and Shenzhen stock market trend. Secondly, this paper studies thelisted company’s market timing effect and announcement effect by using this index as avariable, and reaches the following conclusions: Market timing was existed in the wholeprocess of Chinese listed companies private placement. Investor sentiment of the marketinfluences the listed companies’ choice of additional financing, and the higher of theinvestor sentiment, the listed companies more inclined to raise funds by public issuing.Investor sentiment can also affect the choice of additional objects, the higher of theinvestor sentiment and market valuation, the more likely additional to institutionalinvestors. In addition, the private placement of Chinese listed companies can often get apositive announcement effect. Specifically, when the investor sentiment is high before theevent window period, CISCI with the private placement the company’s cumulativeabnormal returns are positive related; On the other hand, when the investor sentiment islow before the window period, the relationship between CISCI and cumulative abnormalreturns are Negative.This study enriches the theoretical study of investor sentiment and refinancing areas, provides a realistic basis for the investors choosing the right investments of privateplacement, and provides a rational theoretical basis for the private placement companies toimplement optimal allocation of resources.