The Empirical Study On Several Factors Affecting The Wealth Effect Of Private Placement

Private placement refers to a financing activity of listed companies towards a small special interest group of qualified investors.Since 2006,“Measures for the Administration of the Issuance of Securities by Listed Companies” issued,private placement has become one of the most important financing means for listed companies in China,especially since 2013,the number of the listed companies and the scale of private placement has developed a significant growth whereas attracts more and more investors involved in private placement market.Contemporarily studies on private placement,mainly concentrated on following topics: characteristics of the issue body,controlling shareholders' participation and tunneling issue,issuance pricing,discount rate etc.,moreover,the growing size and numbers of private placement cases and the corresponding case studies contribute to research data base.In this paper,we will first have a general factor analysis on the rate of return of private placement and correlated effect,followed by a numerical analysis of each characteristics and corresponding case study.The factor analysis mainly focuses on the following perspectives: 1)the length of time period(# days)between formal issuance day and issuance pricing day;2)controlling shareholders' participation proportion;3)the ratio of issuance size over the issuance body market size.From back testing for numerical analysis,we collect the private placement market data during year 2006 to year 2016 in order to penetrate the excess return of announcement effect of Chinese stock market,then divide the excess return into two versions: short-term return versus longterm wealth effect.In this paper,we would pay more attention on long-term wealth effect analysis.And draws following conclusions:1.Chinese stock market has a positive announcement effect of private placement.2.For the announcement effect of private placement,the long-term excess return is higher than short-term excess return.3.For long-term factor analysis,ratio of issuance size over market size has a positive wealth effect,whereas the length of time period between issuance date and issuance pricing date has a negative wealth effect.