||The impact of corporate governance upon the announcement effect and post-issue performance of firms conducting seasoned equity offerings: evidence from Chinese listed A-share companies
||Department of Accountancy
seasoned equity offerings (SEOs)
short-term announcement effect
本篇論文以於1998 至2001 年間有現金增資的A 股上市公司為樣本，探討公司治理對大陸A股上市公司現金增資宣告效果與現金增資後長期績效表現的影響。已有文獻證實市場對於公司宣佈現金增資有負面的反應及現金增資後，公司普遍有長期績效衰退的現象。由於經理人擁有募集資金的裁量權，他有可能會為了自己的私利而投資於不利於股東的投資方案，因此本篇論文主要的研究目的在探討公司治理的優劣對於現金增資宣佈效果以及現金增資後長期績效表現的影響。
This paper investigates the short-term announcement effect and the long-run stock return performance of companies that conducted seasoned equity offerings (thereafter SEOs) on the Shanghai Stock Exchange and the Shenzhen Stock Exchange of China during the period from 1998 to 2001. It is documented that the market reacts negatively to the announcement of SEOs and SEO firms have been poor long-run investments for investors. Since managers often use the proceeds of SEOs to invest in unfavorable projects for their self interests, I wonder about the impact of corporate governance on the SEOs. Generally, the market reacts negatively to the announcement of SEOs in China, especially for the firms controlled by the state. Following the SEOs, initially the firms gain, however, they decline in the long run with non-issuing firms controlled for the similar size and book-to-market value, especially for the firms controlled by the state. Finally, the empirical results show the short-term stock performance of SEOs firms with better corporate governance is higher than those with worse corporate governance when firms announce SEOs. Following the SEOs, the empirical results support that SEO firms with better corporate governance perform better than those with worse corporate governance following SEOs.
1.1 Research Motivation and Research Background 1
1.2 Research Objective 2
1.3 Research Framework 3
2. The Introduction of Chinese Stock Market, the classification of SEOs and Corporate Governance in China 5
2.1 An Overview of China Stock market 5
2.1.1 The Introduction of the Shanghai Stock Exchange (SHSE) and the
Shenzhen Stock Exchange (SZSH) 10
2.2 The Classification of Chinese SEOs 20
2.3 The Corporate Governance of China 29
2.3.1 The Problems of Corporate Governance in China 32
18.104.22.168 Ownership, Unidentifiable Principals and Conflicts among
A Chaiｎof Monitors 35
22.214.171.124 Weak Managerial Incentives and Market Mechanism 37
3. Literature Review 40
3.1 Literature Review of Seasoned Equity Offerings (SEOs) 40
3.2 Literature Review of Corporate Governance 44
3.3 Hypotheses Development 50
4. Data and Research Methods 53
4.1 Data and Sample Characteristics 53
4.2 Research Methods 57
4.2.1 Variable Definitions and Regression Models 57
4.2.2 T Test for Short-Term Announcement Effect 62
4.2.3 T Test for Long-Run Performance following SEOs 65
5. Empirical Results 67
5.1 Descriptive Statistics Analysis 67
5.2 The Analysis of Short-Term Announcement Effect and Regressive Analysis 69
5.3 The Analysis of post-issue Performances and Regressive Analysis 74
6. Conclusions, Constraints, and Suggestions 83
6.1 Research Conclusions 83
6.2 Research Constraints and Suggestions 85
Table 1: Ownership structure of listed companies from 1992 to 2003 9
Table 2: The SHSE listing statistics 12
Table 3: The SZSE listing statistics 13
Table 4: Listed Companies and industry distribution on the SHSE and the SZSE 14
Table 5: Transaction Costs of A shares and B shares on the SHSE and the SZSE 19
Table 6: SEOs for common A shares 22
Table 7: The differences between listing processes of a rights issue and that of a new issue 24
Table 8: Regulations development of rights issues 26
Table 9: Regulations development of new issues 28
Table 10: The rating of Asian corporate governance 31
Table 11: Data characteristics 56
Table 12: Variable definitions 59
Table 13: Correlation relationship between independent variables 61
Table 14: Sample data statistic description 68
Table 15: Average abnormal returns (AR) and cumulative abnormal returns (CAR) on and
around SEO announcement days 70
Table 16: The mean difference test for a short-term announcement effect of
state firms and non-state firms 71
Table 17: Regression of SEO announcement effects 73
Table 18: Average long-turn (36 months) cumulative returns following SEOs during
Table 19: Mean difference test for post-issue performance of state firms and non-state firms 78
Table 20: Regression of long-run performance subsequent to SEOs for CAR 81
Table 21: Regression of long-run performance subsequent to SEOs for BHAR 82
Figure 1: Research Framework 4
Figure 2: Stock market capitalization on the SHSE and the SZSE 14
Figure 3: Tradable shares verse non-tradable shares on Chinese stock exchanges in 2004 16
Figure 4: The listing process of SEOs 23
Figure 5: modern corporate governance structure 33
Figure 6: Yearly distribution of seasoned equity offerings in China 54
Figure 7: The estimated period and event period 63
Figure 8: AR behaviors versus CAR behaviors during event period 70
Figure 9: Short-term CAR behavior comparisons between state firms and non-state firms 71
Figure 10: Average raw return, average BHAR, versus average CAR subsequent to
the SEOs within 36 months (3 years) 77
Figure 11: Post-issue CAR behaviors comparisons between state firms and non-state firms 78
Figure 12: Post-issue BHAR behaviors comparisons between state firms and non-
state firms 79
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