Research On Long-term Shareholder Wealth Effect Of Listed Companies’ Private Placement In China

Generally, corporation refinancing includes equity financing and debt financing. There are fixed terms of repayment in debt financing, while equity financing generally has no repayment terms. So most companies, especially listed companies prefer to use equity financing to refinance. Equity refinancing includes public issuance of new shares, convertible bonds and private placement of new shares. Compared to public issuance and issuance of convertible bonds, private placement of new shares has its own advantages, such as the threshold of issuance and distribution costs are relatively low, the process of issuance is relatively fast and flexible pricing. In China’s stock market, listed companies also prefer to use private placement to refinance.Based on the theoretical study of relevant literatures, this paper chooses A-share listed companies which have successfully implemented private placement between 30 th June 2006 and 30 th June 2012 in Shanghai and Shenzhen stock market as samples, using event study to develop the long-term shareholder wealth effect impact of the listed companies’ private placement. Specifically the following three aspects were studied:(1) Starting from the overall samples, study the long-term shareholder wealth effect of listed companies’ private placement;(2) According to the different objects of private placement, study the effects of whether the major shareholder involved in listed companies’ private placement or not on the long-term shareholder wealth;(3) According to the different purposes of private placement, study the effects of different purposes of listed companies’ private placement on the longterm shareholder wealth. After theoretical and empirical analysis, this paper draws the following conclusions: The private placement of listed companies has a positive effect on the long-term shareholder wealth; the long-term shareholder wealth effect of listed companies’ private placement which the major shareholder involved in is better than the effect of the private placement which the major shareholder didn’t involve in; the long-term shareholder wealth effect for the purpose of corporation restructuring and assets acquisition is better than the effect for the purpose of project financing in listed companies’ private placement. And over time, these effect will become more significant. For the results of empirical analysis, the paper puts forward recommendations: For regulators, they should encourage listed companies to make use of private placement for refinancing; encourage the major shareholder to take part in private placement; encourage private placement for the purpose of corporation restructuring and assets acquisition. For investors, to ensure long-term growth of shareholder wealth, they can participate in listed companies’ private placement, especially the private placement which the major shareholder involved in and the private placement for the purpose of corporation restructuring and assets acquisition.