The Analysis Of Long-run Performance On Private Placement In China’s A-share Listed Companies

China Securities Regulatory Commission promulgated and implemented the "Administrative Measures for Listed Companies Stock Issuance" on May8,2006. The administrative measures stipulate that the private placement become one of the means of equity refinancing, which establish the basis for the development of private placements in our country. Because of some advantages, the private placements in our country has developed rapidly and the stock market set off a boom of private issue according to the statistics of wind in2007.It’s not only the issuer and investor seek private placements in security market, but also the scholars focus on the research of private placements both in domestic and international academic.Recognizing the literature on private placements, we find that most researches on private placements focus on the study of discount, announcement effects, earning management and the short-term and long-term performance and other aspects. After the empirical studies, a lot of scholars reach a consensus on the theory that the discount in private placements, the positive announcement effects and the good short-term performance, and elaborate the phenomenon completely. They totally agree that almost all the country’s capital markets consist in that phenomenon. However, the long-term performance of private placements differs. The capital markets of different countries have different results, even thought the same country’s capital market has different conclusion due to the different methods of research. And so far we can’t totally explain the "abnormal phenomenon". Reviewing the theories and methods in domestic and foreign literature and combining the characteristics of china’s stock market, this paper attempts to study the long-term performance of private placements from the perspective of the long-term abnormal return and the long-term accounting performance.We select268China’s A-share listed companies which have already conducted private placement from2006to2009as a sample, using methods of qualitative analysis and quantitative analysis, studying the long-term performance of listed companies after private placements. In order to analyze the long-run performance on private placement in China’s A-share listed companies, this paper makes discussion and analysis from these aspects.Firstly, this paper discusses the theoretical aspects of the private placement in detail respectively from foreign market and domestic market, stating the private placement with china’s characteristics systematically. Compared with the America’s private placement, ours started late, owing the advantages of low cost, high efficiency and simple approval procedures. All of these advantages make many listed companies keen on private placement, but also to bring some risks to the market. However, with the development of the security market, we develop private placement on the basis of learning from other capital market.Secondly, this paper conducts an empirical analysis for long-term abnormal returns with event study method and calendar time method. The results show that the long-term abnormal returns after private placement is significantly negative, which indicates that operating performance of China’s listed companies after private placement is not only not improved, but deteriorated. Subsequently, in order to further validate the performance after the private placement, the paper analyzes the accounting indicators before and after placement, obtaining the same results.Finally, this paper summarizes the theoretical analysis and empirical research findings from the following aspects:the opportunity window theory, investors are overly optimistic theory and the theory of earnings management and other aspects. The paper put forward some policy recommendations for the underperformance after private placement and the problems in the market.One of the innovation of this paper is to estimate the adjusted cumulative abnormal returns (CRAadJ) with the method invented by Wruck, Hertzel and Smith. Then, the results show that the adjusted cumulative abnormal returns are much more significant and more persuasive. China’s private placement develops rapidly from May8,2006with the implementation of administrative measures, so the study sample increases significantly, which laid a solid foundation for the research and enhance the reliability of the results. But this paper states the factors affecting the long-term performance of the private placement from the theoretical level rather than empirical study. Finally, we raise some policy recommendations based on empirical analysis for the China Securities Regulatory Commission, which is both reasonable and feasible.