Blockholding and market reactions to equity offerings in China

Cheung, William Mingyan; Lam, Keith; Tam, Lewis

doi:10.1016/j.pacfin.2011.12.002

Cited by 12 publications

(4 citation statements)

References 43 publications

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“…First, Chinese firms with a credit rating (regardless of investment vs. non-investment grade) benefit from less underpricing (Poon, Chan and Firth, 2013). Second, SEO firms with large governmental block holding are less likely to be under-priced because they enjoy an implicit loan guarantee (Cheung, Lam and Tam, 2012;Chen, 2015). Third, SEO firms that issue SEOs with warrants (vs. cash) enjoy a positive return in the short-run (Bae, Chang and Jo, 2013).…”

Section: Seasoned Equity Offerings (Seos)mentioning

confidence: 99%

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

2015

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This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

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Section: Seasoned Equity Offerings (Seos)mentioning

confidence: 99%

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

2015

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“…() and Cheung et al . () find that local and central government ownership have different impacts on firm performance. In particular, SOEs controlled by local governments usually perform worse than those controlled by the central government due to weak monitoring and supervision from the government.…”

Section: Resultsmentioning

confidence: 97%

Does control‐ownership divergence impair market liquidity in an emerging market? Evidence from China

Chu

Liu

Tian

2014

Accounting & Finance

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This paper examines how institutional characteristics of emerging economies influence the effect of control-ownership divergence on market liquidity. We find that the divergence is negatively associated with liquidity and that this negative relationship is more pronounced in firms with more severe agency problems and information asymmetry. We argue that in an emerging market, the negative effect of the divergence on liquidity is worsened by state ownership and poorer shareholder protection, both of which result in more severe agency conflicts; we also find, however, that this effect is alleviated by the NTS reform, which aligns the interest of different shareholders.

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“…Throughout a SEO event, the issuing firm holds the exclusive right to choose between two issuance modalities: the preferential subscription-right offerings and the public-right offerings. In the right type of offerings, the existing shareholders enjoy the granted priority-right to subscribe to new shares, while in public offerings new shares are directly issued to public investors (Pastor-Llorca and Martin-Ugedo, 2004;Siougle, 2007;Bo et al, 2011;Cheung et al, 2012;Dang and Yang, 2013). Previous studies indicate that the earnings management intensity varies according to the SEO modalities adopted (Chen and Yuan, 2004;Haw et al, 2005;Klibi, 2006;Kothari et al, 2016).…”

Section: Seasoned Equity Offeringsmentioning

confidence: 99%

Large institutional investors and the pressure to manage earnings surrounding seasoned equity offerings

Njah

Trabelsi²

2019

IJLMA

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Purpose The purpose of this paper is to investigate the monitoring role exerted by large institutional investors and their ability to restrict the earnings management practices conducted around seasoned equity offerings (SEOs). Design/methodology/approach The sample includes 130 French SEOs by non-regulated firms during 2004-2015. The authors used various cross-section, univariate and multivariate tests using several proxies for earnings management. They attempt to highlight that firms issuing SEOs are more able to manage earnings around SEOs owing to the predominance of large speculative institutional investors. Noteworthy, the monitoring role exerted by sophisticated institutional investors turns out to restrict the earnings management opportunities surrounding a SEOs event. Findings The results show that the issuing firms tend to manipulate earnings in an upward trend with respect to the year preceding the SEO offer. Thus, a special attention has been drawn on the fact that the issuing companies strive to prove their ability to manage earnings around SEOs in presence of large speculative institutional investors. Practical implications The results provide useful insights into the role different types of institutional investors play in terms of enhancing both governance and accounting information quality. Originality/value This paper adds to the literature questioning the evidence that institutional investor activism frequently engage in misleading earnings management around corporate events. The authors provide an alternative explanation for earnings management around SEOs in the French context.

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Blockholding and market reactions to equity offerings in China

Cited by 12 publications

References 43 publications

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

Does control‐ownership divergence impair market liquidity in an emerging market? Evidence from China

Large institutional investors and the pressure to manage earnings surrounding seasoned equity offerings

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