The Bond Market Effect Of Private Equity Placement

In recent years,private equity placement has become more and more popular among listed companies and has gradually become a very important means of financing for listed companies,effectively improving the efficiency of resource allocation in Chinese capital market.However,the operation mechanism,policies and regulations on private equity placement are not yet perfect in China,and it frequently occurs in private equity placement that the phenomenon of major shareholders infringing on minority Investors’ interests.In addition,in the process of strictly controlling financial risks and promoting supply-side structural reform,many problems,such as large rolling pressure of debt and short-term structure,have emerged.Since the default of bond 112061 in 2014,the events of default bonds have been expanding in China,especially those of Yongmei Group and Brilliance Auto,which makes the regulatory authorities and investors begin to attach great importance to the impact of equity-related behaviors on the interests of bond holders.So,what is the impact on the bond market of private equity placement,the main means of refinancing equity in Chinese capital markets? Existing studies have not reached a clear conclusion.Based on the above,first,this paper takes the private equity placement events of Ashare listed companies from 2010 to 2020 as the initial research sample,selects bond credit spreads and the size of private equity placement as explained variable and core explanatory variables respectively,and analyzes the short-term impact of private equity placement on the bond market through the mixed cross section model and two-way fixed effect model.Secondly,the heterogeneity analysis is carried out from five aspects: the nature of property rights,financial leverage,whether major shareholders participate in subscription,equity concentration and the remaining maturity of bonds.Finally,we examine the long-term effect of private equity placement on the bond market.The results are as follows:(1)Bondholders hold positive expectations for private equity placement,and the size of private equity placement is significantly positively correlated with abnormal returns of bondholders.The short-term bond market effect of private equity placement is consistent with the signaling hypothesis.(2)Bondholders of non-state-owned enterprises have a more optimistic attitude towards private equity placement,and the signaling effect is more significant;when enterprises have higher financial leverage or equity concentration,bondholders react more positively to private equity placement,and the signaling effect is more significant;The participation of major shareholders in the subscription is unfavorable information for bondholders,who have a negative attitude towards it;bondholders of companies with shorter remaining maturity are less worried about the future uncertainty,and their attitude towards private equity placement is more positive,the signaling effect is more significant.(3)Compared with companies without private equity placement,the bond credit spreads of companies with private equity placement have significantly decreased within three years,which indicates that the impact of private equity placement on the bond market remains in the long term.This paper makes the contributions as follows:(1)In terms of research methodology,the existing literature is mainly based on cumulative abnormal returns to measure the market effect of private equity placement.Considering the actual situation of the Chinese credit bond market and the drawbacks in calculating the cumulative abnormal returns,this paper selects the credit spread of corporate bonds to measure the response of the bond market,which can more directly represent the risk expectation of bond holders,and more accurately portrays the impact on the bond market of private equity placement.(2)In terms of research content,this paper examines the bond market effects of private equity placement from the perspective of the conflict between major shareholders and bondholders,and supplements the empirical evidence of the capital market reactions to private equity placement,which is of great significance to promote the orderly operation of the private equity placement,protect the bond holders and push the healthy development of the corporate bond market in China.