Determinants of ownership structure and performance of seasoned equity offerings: Evidence from Chinese stock markets

Sazali Abidin (Department of Finance, University of Waikato, Hamilton, New Zealand)
Krishna Reddy (Department of Finance, University of Waikato, Hamilton, New Zealand)
Liehui Chen (Department of Finance, University of Waikato, Hamilton, New Zealand)

International Journal of Managerial Finance

ISSN: 1743-9132

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

Download as .RIS

Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.