The Research On The Correlation Between Private Placement,M&A,Tunneling And Corporate Value

The reform of non-tradable share leads China's capital market into the era of full circulation in 2006,removing institutional barriers of the mergers and acquisitions in the secondary market.And the policies promulgated by the state actively promoted the M&A process,making the mergers and acquisitions gradually become a focal point in capital markets.In this case,private placement which is an efficient financing way of M&A began to be included in the scope of securities issuance,and has been developed into a mainstream of refinancing way.Because of the simpler issuance process,lower issuance cost,the flexible price and lower issuance threshold,the private placement has been quite popular in public companies.However,there are obvious discounts in the implementation of private placement,and it is often emerged that the large shareholders participate in private placement and connected transaction in M&A,which lead private placement and M&A to become a tunneling channel of the large shareholder,infringe the interests of small shareholders and affecting corporate value.This paper clarifies the tunneling problem and the impact on the corporate value in private placement and M&A by analysing different investor of private placement,discounts of private placement,connected transaction,premium of M&A and corporate value etc.In other words,this paper tries to analyze whether the private placement and M&A is drived by tunneling or corporate value.In private placement,the public companies may influence the issuing price through the earnings management before private placement,manipulate the stock price and long-term suspension to achieve issuing stocks to large shareholders by higher discount rate.And through the high proportion of subscription and the size of the issuance of public companies to achieve the transfer of wealth from small shareholders to the large shareholders.In the M&A,the associated M&A has a higher premium and worse asset quality,leading to transferring interests to large shareholders by merging high-priced assets of large shareholders and their associated non-performing assets.Therefore,this paper uses the method of group research to study the relationship between the identity of investors and the discount rate,the acquisition target and the premium rate of M&A and the impact on the corporate value.Based on the market timing hypothesis,theory of control right and opportunistic behavior theory,this paper analyzes and examines the impact mechanism of discounts,and tunneling in the discounts of private placement and premiums of mergers and acquisitions and the impact on corporate value.The empirical results show that:(1)the discount rate of the private placement in which is participated by the large shareholders is significantly higher than that of the non-major shareholders.(2)Public companies influenced the discount rate through the earnings management before private placement,long-term suspension.The lager discount rate,the larger transfer of wealth.(3)The premium rate of merging an asset of large shareholders will be lager than that of the non-major shareholders.(4)The M&A which large shareholders participated in significantly inhibit the increase of the corporate value,but the M&A in which non-major shareholders participated don't significantly inhibit the increase of the corporate value.Finally,this paper from the regulator and investor's point of view to make three recommendations:(1)to improve the pricing mechanism of private placement and M&A,for regulating the behavior of public companies.(2)to strengthen the intermediary agencies's responsibilities of Verification on public companies's behavior,and regulate the assessment of assets.(3)to guide small investors to rationally identify the nature of private placement,M&A and Tunneling.