Empirical Research On Corporation Growth And The Associated Shareholders’ Subscription To New Shares In The Private Placement

With China’s rapid economic development today, a company’s capacity of financing has become a key factor to determine its success, and refinancing through the capital market is an important method to raise funds, so equity financing has become a financial issue concerning many scholars. On May 8th, 2006, the promulgation of the "Measures for the Administration issued securities of listed companies" makes the private placement become a way to refinance boarding the stage of history. Among the refinancing instruments, private placement needs less issuance conditions, requiring lower costs and more simple procedures, also has other advantages, which make more and more today’s companies welcome it. It can be expected that the private placement will occupy the most important refinancing position in the future. With the implementation of the private placement in the companies increasing year by year, the study of the private placement in academia also deepens, and scholars study it mostly from the pricing of the private placement, as well as the wealth effect, to the earnings management implemented of before the private placement, which mainly concern with the changing of share price before and after the private placement. However, the study of the motivations for the subscription of new shares and subscribed proportion factors of listed companies in the private placement are almost there.In this paper, the companies implemented private placement are made as samples, and the subscription among related shareholders in the private placement are made as a starting point to explore the motivations and results when related shareholders subscribe in the private placement. Whether the company that has a higher growth will increase the subscription proportion of the associated shareholders for new shares in the placement? Whether the company’s future performance is better when the associated shareholders subscribe for a higher proportion of new shares of private placement? This paper will review the domestic and foreign current researches firstly, followed by the overview of the theory involving in the correlation between corporation growth and the associated shareholders’ participation in subscribing new shares in the private placement, and then on the theory analysis concerning the correlation between corporation growth and the associated shareholders’ participation in subscribing new shares in the private placement, and the theories involved are asymmetric information theory, regulatory theory, etc. And then to conduct empirical studies concerning the assumptions put forward in this paper to verify the correlation between variables, through theoretical and empirical analysis, this paper get the following conclusions:(1) When the company’s growth is better, because of information asymmetry, associated shareholders will be more actively involved in the subscription of new shares in the private placement;(2) When the degree of information asymmetry is higher, the subscription proportion of the associated shareholders for the growing companies will further increase;(3) If the associated shareholders in the company to subscribe for higher proportion of the shares in the private placement, the company’s performance in the future is better. In response to these conclusions, the paper puts forward some suggestions, that related departments should encourage associated shareholders to subscribe for new shares in private placement, at the same time to prevent the transfer of benefits the associated shareholders carry out in the subscription process.This paper is divided into six parts. The first part is an introduction, presenting the research background, research ideas and framework of this paper. The second part is the review of the domestic and foreign literature, including the analysis of the motives of the company implemented a private placement of new shares, summed up the results of different studies about the private placement of new shares to the company’s wealth effect and performance. The third part is the overview of the theory involving in the correlation between corporation growth and the associated shareholders’ participation in subscribing new shares in the private placement, explaining the concept and the types of private placement, analyzing the differences between the different subscription objects in the placement process, summed up the measure of corporation growth in different ways, and elaborate asymmetric information theory, regulation theory, control theory. The fourth part is the theory analysis concerning the correlation between corporation growth and the associated shareholders’ participation in subscribing new shares in the private placement, theoretically explaining how the company’s growth affects the associated shareholders’ subscription for new shares of the private placement, as well as how the proportion of associated shareholders’ subscription affects the company’s performance in the future, and makes three assumptions in this paper: Hypothesis 1, when the corporation growth is higher, associated shareholders will be more actively involved in the subscription for new shares in the private placement, which means the proportion of subscription is higher; Hypothesis 2, when a company’s degree of information asymmetry is greater, and the corporation growth is higher, the proportion of the subscription for new shares in the private placement by associated shareholders is higher; Hypothesis 3, when the proportion of the subscription for new shares in the private placement by associated shareholders is higher, the company’s performance in the future is better. The fifth part is the empirical test concerning the correlation between the corporation growth and the associated shareholders’ participation in subscribing new shares in the private placement, making the listed companies which implementing private placement of new shares as samples, using descriptive statistics, regression analysis and other methods, to test the hypothesis proposed in this paper. The sixth part is the conclusions and policy recommendations, which summarize the findings of this paper and put forward some suggestions for improvement, noting the shortcomings and deficiencies in the research.