An Empirical Study On The Announcement Effect And Long-term Wealth Effect Of Private Placement

With the promulgation and implementation of laws and regulations in relation to private placement since 2006,it has provided institutional guarantee for the listed companies to raise money through private placement in China.On the other hand,private placement is growing rapidly because of its low financing cost,easy operation,no profit requirement and no reduction of main shareholder's control rights.According to the data from Wind,4332 samples of seasoned equity offering occurred in A-share market from 2006 to 2018 in China.Among them,the proportion of private placement was 94.53%.From 2006 to 2018,8407.4 billion yuan was raised through seasoned equity offering,while 7811 billion yuan was raised through private placement,accounting for 92.90%.It shows that private placement has become the main way of seasoned equity offering in China.With the increasing popularity of private placement among listed companies and investors,the abnormal return of private placement has gradually attracted widespread attention of scholars and researchers.Scholars at home and abroad have different opinions on the announcement effect and long-term wealth effect of private placement.How does the announcement effect and long-term wealth effect of private placement behave in China? What is the relationship between the related factors and the announcement effect and the long-term wealth effect?This paper studies the announcement effect and long-term wealth effect of private placement by using event study method.Firstly,based on the theory of information asymmetry,over-optimism and the decomposition of book-to-market value ratio,the hypothesis of this paper is put forward based on the relationship between the nature of ownership,analysts' attention,pricing bias and announcement effect and long-term wealth effect of private placement.Then,this paper selects 891 listed companies which successfully implemented private placement from 2006 to 2015 as samples,and measures the announcement effect and long-term wealth effect by calculating the short-term cumulative abnormal return and the buy and hold abnormal return.The announcement effect and long-term wealth effect are empirically analyzed and the relationship between short-term announcement effect and long-term wealth effect of private placement and ownership of listed companies,analysts' attention and pricing bias are tested.The empirical results show that: firstly,the short-term announcement effect and the long-term wealth effect of private placement are positive;Secondly,both the shortterm announcement effect and the long-term wealth effect of private enterprises are stronger than those of state-owned enterprises;Thirdly,the higher the analyst's attention is,the lower the short-term announcement effect is.Fourthly,analysts' attention has a greater impact on the short-term market performance after private placement of private enterprises.Fifthly,the pricing error factor is negatively correlated with the long-term market performance of the company's stock price after the private placement.There is also shortcoming in this paper: sample selection does not take into account the factors of the new policy.Because this paper studies the long-term wealth effect of private placement.It needs 36 months of market transaction data,so data in this paper is selected up to 2015,but the CSRC revised the Rules for the Implementation of Private Placement of Listed Companies in 2017,so the time span of sample used in this paper does not consider the impact of the new rules.