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On the small and medium-sized listed companies equity refinancing theory

Author: ZhouYunLan¡¡CaiGenNv From: www.yourpaper.net Posted: 2009-08-05 10:48:00 Read:
Paper Keywords: small and medium-sized listed companies equity refinancing issue way negative effect
Abstracts: small and medium-sized listed companies equity refinancing is the follow-up process of the SMEs listed equity financing to study the nature and characteristics of small and medium-sized listed companies refinancing, has an important role in the innovation, development and growth of SMEs. Proceed from the the company equity refinancing issue and long-term negative effects, reviewed and summarized in the Western classical theory of the equity refinancing issue the way the "mystery", as well as the the equity refinancing negative effect that long-term performance deterioration, long-term non-normal stock income significantly negative explanation of the phenomenon. And combined with the characteristics of small and medium-sized listed companies, the conclusion of the equity financing of small and medium-sized companies in the issue of the way, and the long-term negative effects.


Small and medium-sized listed companies equity refinancing SMEs listed equity financing subsequent financing process to study the nature and characteristics of small and medium-sized listed companies refinancing, has an important role in the innovation, development and growth of SMEs. The company equity refinancing study the earliest dating back to the 1960s. Academia special attention to two aspects, on the one hand, the mystery of the issuance of equity refinancing way: when the company SEO issue why not choose the lowest-cost way to equity refinancing in the the various SEO issuance way different enterprises is How to make a choice, while small and medium-sized listed companies with large listed companies, what characteristics; the other hand, is the mystery of the the equity refinancing long-term results: the long-term performance of the SEO company will decline, and whether the long-term performance of companies of all sizes have difference, whether small and medium-sized companies is more serious negative effect.

First, the small and medium-sized listed companies equity refinancing distribution methods Theoretical Review
There are mainly two: the release of the Company's equity refinancing placement financing to existing shareholders and the issuance of new shares to the market, the allotment and can be divided into non-underwriting allotment (ie, issued by the companies themselves) and underwriting allotment (underwriting by an investment bank or securities dealer) . Eckboand Masulis (1992) found that in the study U.S. companies refinancing options, underwriting allotment issuance costs higher than non-underwriting allotment the private issuance release higher cost than underwriting allotment. See enterprise shall adopt the non-underwriting rights issue of new shares issued in accordance with the view to maximize shareholders' equity. While there are obvious differences in the way different countries capital markets, corporate equity refinancing, American and Japanese companies tend to choose higher finance costs of issuance; Canada, Europe and Asia, the rights issue is still the main equity refinancing way . Smith (1977) study found the SEO issuance mystery, Western scholars were discussed and proposed different theories to explain this.
(A) equity refinancing issue of the way the mystery theoretical explanation
Equity refinancing issue the way the theory to explain the main points are the following: First, the agency cost theory. The theory is that in Western countries, companies usually have a considerable proportion of the members of the Board from investment banking, these directors may be through lobbying or put pressure on the company by way of the issuance of new shares to finance. The offering of shares in the underwriting, the investment bank can transfer benefits to the company's management, both through equity financing for special interests. Of control theory. The theory is that if the company is composed of minority shareholders by controlling shareholders and non-control of the shareholders to have control over refinancing issue will have a lot of autonomy. Both the interests of the shareholders in the company is not exactly the same, the controlling shareholders will have control over the maximum benefit for themselves, not be considered to maximize the interests of all shareholders. Some listed companies, especially family businesses, in order not to dilute control over, do not want to select underwriting allotment and issuance of new shares to issue new shares, because these methods may pose a threat to the control of the family company. Third, the asymmetric information theory. The theory includes two asymmetric information views: one is to emphasize the role of underwriters in the issue prove, that internal managers have far more than outside investors, investors will managers of new shares issued motivation doubts . In order to reduce information asymmetry, enterprises issuing shares through underwriters, investors believe that the underwriters have been properly evaluated the prospects for business development and stock prices, in order to ensure the success of the stock issue; another is a different quality characteristics based on enterprises that low-quality enterprises by issuing new shares, while the high-quality corporate allotment of new shares issued, in the allotment this group enterprise, high quality enterprise by hiring high-quality underwriters. Fourth, the transaction cost theory. The theory is that the issue of new shares under the RO, investors need to give up the allotment Option to sell its allotment Option by the securities market, thus creating transaction costs. Also believes that the costs incurred by investors because of the change of portfolio, which can effectively avoid the issuance of the new shares can be avoided allotment manner unfavorable transaction costs by way of additional shares. Moreover, the placement of shares to reduce the liquidity of the stock, and the issuance of new shares to improve the liquidity of the stock, and thus dispersed ownership of large enterprises tend to choose the way of the issuance of new shares issued stock, and ownership concentration of small and medium-sized companies tend to choose the RO to issue new shares. Adverse selection cost theory. The theory is that the enterprise is to invest depends on three important parameters: the future profitability of the investment, the financing of direct issue costs, and may occur from existing investors to new investors wealth transfer costs, and forecast a smaller scale, and held Unit focused companies use the RO high frequency.
(B) small and medium-sized companies equity refinancing issue Conclusion
Transaction costs perspective, Kathare (1997) and Hansen (1988) study showed that: the issuance of new shares after the company's shareholding structure to further diversify trading volume expanded significantly; After allotment, the shareholding structure of the company is more focused, trading volume did not change significantly. For large enterprises, if the issue of new shares, the decline in the value of the stock due to lower stock liquidity serious than small businesses; stake more concentrated small company, its investors for long-term investors by RO The placement of shares to raise capital can effectively reduce the direct issue costs, reduce the information asymmetry between investors and the management of the Group. Thus, dispersed ownership of large enterprises tend to choose the way of the issuance of new shares issuing shares, issue new shares and ownership concentration of small and medium-sized companies tend to choose allotment. Adverse selection cost perspective Eekbo and Masulis (1992), smaller and higher frequency of RO ownership concentration. Under the control of the point, if it is the right of shareholders and non-controlling minority shareholders have control over the composition of the shareholders to have control over the words of the company's managers, and usually select IPO method there is a lot of autonomy. Fractional issue new shares in order not to dilute the control over the types of enterprises is a family enterprise or SME unwilling to opt for underwriting allotment and issuance of new shares, because these methods may pose a threat to the controlling shareholder of the company's control, and non-underwriting allotment . Thus, from the above equity refinancing transaction costs of the "mystery" of the distribution methods, the theory of adverse selection and control of what-if analysis to see SMEs listed companies should select the allotment particularly non-underwriting allotment way, instead of issuing new shares ways.

Second, the small and medium-sized listed companies equity refinancing Theory of negative effects
Stigler (1964) study found that the SEO company's stock experienced after the release of a long-term low-mystery performance, price behavior for the downward trend, but the issue until after the 1986 System. Most countries have found the company equity refinancing SEO obvious negative effect, including the announcement of negative abnormal returns and prices in the short term negative effects, and long-term operating results worse long-term abnormal stock return is significantly negative, they fell . As Louhran T, J, Ritter (1995) and D, Katherine Spiess (1995) found that the long-term negative abnormal USA SEO extraordinary income; Cai and Loughran (1998) and Ferris (1997), also The study SEO Similar results were found on the Japanese market. Scholars from various countries were given a window of opportunity, price pressures, changes in the capital structure, the signal is assumed to support and explain the negative effects of the theory follows from the the equity refinancing adverse and favorable news On summarized elaborated.
(A) equity refinancing theoretical explanation of the negative effects
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