Determinants of ownership structure and performance of seasoned equity offerings: Evidence from Chinese stock markets
International Journal of Managerial Finance
ISSN: 1743-9132
Article publication date: 21 September 2012
Abstract
Purpose
Since 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/approach
The 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.
Findings
The 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/implications
The paper's evidence contributes to an understanding of the wider implication of the share split reform undertaken by the CSRC.
Practical implications
The 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/value
The paper is novel in regard to the data and the wider research paradigm used.
Keywords
Citation
Abidin, S., Reddy, K. and Chen, L. (2012), "Determinants of ownership structure and performance of seasoned equity offerings: Evidence from Chinese stock markets", International Journal of Managerial Finance, Vol. 8 No. 4, pp. 304-331. https://doi.org/10.1108/17439131211261242
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited