Private equity placements and the market responses in China

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Other Title
  • 中国における第三者割当増資の実証分析
  • チュウゴク ニオケル ダイサンシャ ワリアテ ゾウシ ノ ジッショウ ブンセキ

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Abstract

Recently, many firms have issued new equities privately in the Chinese stock markets. This paper empirically examines the announcement effects of private equity placements in China. We obtained the following three results: First, private placements of equity are associated with positive abnormal returns. Moreover, there is a strong positive relationship between abnormal announcement returns and price when shares are placed, suggesting that the placement price conveys important information regarding firm quality and value. Second, when the value of firm equity depends largely on intangible assets, a more positive abnormal return is found when the firm's investment opportunities are large relative to assets in place. This suggests the use of private placements to signal undervaluation. We also found that the market reacts more favorably to issue to the corporation blockholders, singly. Third, private placements issued at a premium exhibit a permanent positive impact on firm value, in contrast to those issued at a discount.

Journal

  • 經濟學論叢

    經濟學論叢 64 (2), 405-452, 2012-09-20

    The Doshisha Economic Association

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