The Emprical Research On Long-run Performance Following Private Placement Of Equity

In this paper, we studied A-share listed companies in Shanghai andShenzhen whichissued private placement between2006and2011,calculated the excess rate of return using BHAR method. The results showthat: the long-term performance after the issuing was strong in2years,while the U.S. private placement of long-term performance of the stockwas weak, indicating that the Chinese capital market investors in theprivate placement of listed companies declared Information inadequateresponse.In addition, we found that when only large shareholders to participatein the private placement of shares, compared with non-major shareholdersto participate in, the long-term performance of the company’s share pricewas not being significant different. When the major shareholders tosubscribe for a private placement of shares using assets, the long-termshare price performance during the next two years was better than thesample in cash subscription.In mergers and acquisitions class theme stocks can outperform thecorresponding sectors, whilethe samples of financing for the projects was relatively underperformed.The results meet that investors are overlyoptimistic. The significant positive returns mainly comes from thesystematic industry return. Only in a very few cases could outperform theindustry comparison segments. In contrast, the long-term performance ofthe cases which shareholders participant in private placement using assetscould outperformed the industry, indicating that the major shareholders didnot to transfer benefits, or encroachment interests of small investorsthrough a private placement. Besides, the mergers and acquisitions acrossindustries or among the same industries, the overall market and backdoorlisting category is not able to be significantly outperform the industry.For investors, they need to screening for the target company,makinghigh-level projections of future earnings, to find out the rightcompany tocapture alpha.