Corporation Growth,Institutional Investors And Private Placement Discount Rate

Private placement has already become one of the most popular equity refinancing ways in China because it is not strict with requirement,however,most of the private placements in Chinese capital market are carried out at a high discount rate.As a powerful role in capital market,institutional investors play more and more important role in private placement in recent years,so we want to discover what effect institutional investors have on private placement discount rate,and does different kinds of institutional investors have different effect on private placement discount rate?Based on former studies,theory analysis and empirical analysis,we examined the relationship between institutional investors and discount rate in the sample of private placements over 2006-2015.We discussed the relationship between the participation of institutional investors and discount rate,and the relationship between degree of participation and discount rate.We also add a variable testing growth to divide our ample into two groups,and then we divide institutional investors into six kind,they are broker,trust,insurance,fund,investment company and others to examine their effect on discount rate.Lastly,we examine the relationship between corporate visits and discount rate.We discovered following results: Firstly,when the company is in high growth,if institutional investors joined in private placement,the discount rate turned out lower than private placement institutional investors didn’t joined in.When the company is in high growth,the participation of institutional investors didn’t influence discount rate significantly.Secondly,different kind of institutional investors showed different influence in corporate governance,when the company in high growth participated in private placement,the individual institutional investors,representatively brokers and funds,and trusts and investment companies classified as grey institutional investors,the more they purchased,the lower discount rate was.However,the result turned out that except the participation of investment companies in private placement decreased discount rate,all the other institutional investors didn’t decrease discount rate when the company is in low growth.Thirdly,when the company is in high growth and had been surveyed by institutional investors in the year before private placement,the more they purchased,the lower discount rate was,but we didn’t find the same result when the company is in low growth.