ABSTRACT
According to existent literature, some researchers proposed that private placement with large shareholders participation demonstrate tunneling behavior. Wruck and Wu’s research showed that large shareholders consolidate their control rights by private placement to gain their own interests. He and Zhu proposed that large shareholders achieve the goal of diluting the small and medium-sized shareholders’ equity through the discount. Zhang and Guo supposed the controlling shareholders of listed companies transfer the company wealth by using their rights of control of private placement. Discount level and large shareholders’ subscription proportion codetermine the wealth tunneling amount. Wang and Zhang divided the listed companies samples that conduct private placement
1 INTRODUCTION
Private placement and rights issue have always been the main way for equity refinancing of listed companies. With the development of China’s capital market, particularly the reform of non-tradable shares and the implementation of “Administrative Measures for the Issuance of Securities by Listed Companies”, private placement was immediately applied by lots of companies for refinancing and restructuring. Statistics show that in 2011 and 2012 the number of private placement listed companies was 179 and 148 respectively, among which 436 companies were implementing or had implemented the private placement plan in 2013, but only 42 listed companies chose rights issue to refinance during these years. Private placement is widely used by listed companies mainly because it can make the company avoid the impact of the secondary market, and finance enough fund from the large shareholders, institutional investors or strategic investors directly. In addition, private placement reduces the information disclosure requirements and audit time, thus saving a lot of financing cost.
