Effects Analysis On Private Placement For Different Financing Purposes Of Wolong Electric Group Co.Ltd

Since allowed as a financing mean in the capital market of China in 2006,private placement has been widely adapted by listed companies for its efficiency.As China national economic growth has slowed down,along with the urbanization,and the adjustment and upgrading of industrial structure has processed deeper,competition among companies between different industries had become even fiercer,various companies has had pressing financing requirements.Therefore private placement has been used frequently ever than before in the capital market of China.Companies usually finance for many reasons based on different develop planning,how do these private placements effect the business and do these private placements help achieve their goals? These questions are vital to the decision makers.This paper focused on the private placements conducted by Wolong Electric Group through 2006-2016,using event study method and accounting data method analyzed how “private placement for projects”?“private placement for M&A”?“private placement for financial liquidity” separately effects company market value and long-term operating efficiency.In the event study,research results show that capital market did rational and cautious feedback to the private placements for different financing purposes of Wolong.When the financing goal was clear and its performance could be quantitatively assessed,there turned out to be positive abnormal returns.Meanwhile,when the financing goal needed an uncertain term to achieve or it had operating risks,the capital market feedback turned out to be pessimistic.Besides,the research indicated a possibility of information disclosure or insider trading in Wolong's private placements.Using accounting data method,this paper selected the mainstream accounting index and contracted financial data between the year private placements took place and the year following it.It turned out that private placement for M&A helped improve profitability and growth while private placement for projects helped a lot in financial liquidity and capital structure.Combing with these conclusions and the problems Wolong encountered in its practice,at the end,this paper also offered some advises for both companies and the relevant government department in charge.