Study On The Motivation And Economic Consequences Of Private Placement For Construction Enterprises

The construction industry is a mainstay industry in China,which has the features of large-scale investment,long capital recovery cycle and low profit margins.The features of the construction industry make most of the construction enterprises in a high leverage state and financial risks are constantly accumulating.Along with the advancement of the marketization of our country,the competition in construction industry is becoming more and more fierce,the downscale of bank credit scale also make the development space of construction enterprise severely limited.If the construction enterprises want to improve the ability to undertake the project and improve construction ability,they must carry out expanding financing channels.After the successful completion of the shareholder structure reform,private placement has been widely recognized by the capital market and become the main way of China’s equity financing because of its advantages which means low cost,low barriers to entry and effective financing.In this background,it becomes more and more dynamic that the marketing construction enterprises meet the needs of funds through carrying out private placement,so the study on the motivation and economic consequences of private placement for construction enterprises has important significance.This paper state the relevant theories about financing structure and private placement at first,review the research at home and abroad about the motivation of private placement and the influence of private placement to the stock price and to the financial performance.Based on the theoretical research,I take the marketing construction enterprises of Shanghai construction group co.,Ltd as an example,which make private placement in the A stock market in 2014,analyzing the specific motivation of the placement of Shanghai construction engineering group from the perspective of enterprise development,and using the method of event study 、 financial indicators and EVA indicators from the three dimensions of the market reaction 、 financial performance and economic value added to analysis the the economic consequences of private placement.Through the research I find that easing the financing constraints,adjusting the business structure and improving the financial situation is the specific motivation of the private placement;Private placement not only to create excess returns to shareholders,to improved the company’s financial performance in the short term while this positive effect is unsustainabe in the long term,but also creat value to shareholders which is also unsustainable.The analysis of this paper provides a certain reference to the decision-making about private placement of the construction enterprises in our country and investors to analyze the private placement behavior of listed company.