Determinants of ownership structure and performance of seasoned equity offerings

Abstract

PurposeSince the initiation of the share split reform by the Chinese Securities Regulatory Commission (CSRC) in 2005, the private placement has become the major source of raising equity after IPO. The purpose of this paper is to investigate why listed firms in China prefer private placements compared to other options of raising capital.Design/methodology/approachThe ordinary least squares regression, the piecewise regression and the cross‐sectional regression analysis were undertaken to investigate the determinants and characteristics of the seasoned‐equity offerings announcement effects. Probit regression analysis was taken to estimate the probability of a firm choosing private placements.FindingsThe authors find positive significant announcement abnormal returns for private placement. The findings also indicate that operating performance deteriorates immediately after announcement and poor operating performance is more likely to be contributed by large size portfolios, which suggests size effect.Research limitations/implicationsThe paper's evidence contributes to an understanding of the wider implication of the share split reform undertaken by the CSRC.Practical implicationsThe paper provides insights for policy makers in China and around the world who have and wish to adopt similar practices within their jurisdictions. Similar research can be conducted in other emerging markets to enable better understanding and implications of seasoned equity offerings on firm financial performance.Originality/valueThe paper is novel in regard to the data and the wider research paradigm used.

Competitors’ stock price reactions in response to private equity placements: evidence from a transitional economy

“…1 In 2010, UK companies made 336 P.E.P.s, amounting to $17.9 billion, while Australian companies offered $9.5 billion in private equity in 593 placements. In China, P.E.P.s were issued by 85% of companies, accounting for 81% of the value of seasoned equity KEYWORDS Announcement effect; China; competitive effects; contagion effects; competitor firms; private equity placement regulations financing during the period from 2006 to 2010 (Abidin, Reddy, & Chen, 2012;Fonseka, Colombage, & Tian, 2014;Yu & Xu, 2010). 2 As a result of the current financial crisis, people believe that financial markets should be more regulated than they were previously.…”

“…administrative regulations on P.E.P.s (Lu, Li, & Wu, 2011) that distinguish the Chinese private equity market from the rest of the world. Abidin et al (2012) argue that the new P.E.P. regulations have fewer requirements than those regulating public placements, which has resulted in the dramatic increase in the number of P.E.P.s since 2006.…”

Corporate Governance and the Performance of Seasoned Equity Offering Firms in Nigeria: The Mediating Effect of Agency Costs

“…A = P AR R + P AM M +P AB B+ P AI I +P AV V---------(1) P = (P AR R + P AR R P PA A) + (P AM M + P AM M P PA A) + (P AB B +P AB BP PA A) + (P AI I + P AI I P PA A) + P AW W---- (2) Where: R = CEO Role Duality M = Managerial Ownership B = Board Independence A = Agency Costs P = Post -SEO Performance V = the unexplained variance that could not be explained by the variables in the model about agency costs W = the unexplained variance that could not be explained by the variables in the model about post -SEO performance…”

“…Extensive literature has documented the beneficial role of effective governance in improving the performance of SEOs e.g. [8]; [47]& [95]; [1]; [66]; [86] [24] [43]; [51]; [2]; [93].…”

“…Similarly an additional strand of the literature documented the role of effective corporate governance in the performance of firms e.g. [34]; [94]; [8]; [46]; [14]; [32]; [31]; [57]; [29]; [92]; [1]; [2]; [82]; [66]; [23]; [37]; [27]; [45]; [11]; [47]; [12].…”