Abstract
This article examines the market discounts and announcement effects of private equity placements in China. We find that, on average, Chinese firms have about 30% market discounts for private placements, which is higher in number than those of US firms. Firms experience positive announcement effects for private placements and such effects are positively related with the market discounts.
Acknowledgement
This work is partially supported by Fok Ying Tung Foundation (No. 111086), the Natural Science Foundation of China (No. 71073020) and ‘211’ Project foundation (Phase 3) of the University of International Business and Economics.
Notes
1During our sample period, 2 firms have private placements three times, and 22 firms have private placements twice.
2Hertzel and Smith (Citation1993) and Krishnamurthy et al. (Citation2005) find that the market discount for private placements of US firms is about 20%.
3Wruck (Citation1989) finds that the announcement effect for private placements of US firms is about 4.41%. Hertzel and Smith (Citation1993) and Krishnamurthy et al. (Citation2005) use larger sample to find that the numbers are only 1.72% and 2.21%.