6.1 Concluding Remarks
The pu中ose of this study is to explore whether or not private placement announcements have inf1uence on shareholders' weaIth, after the management system of private placement was amended in October, 2005, and to further analyze the inf1uential factors of abnormal retums after private placement announcements and premium (discount) rate. The research targets are the listed
Chiao Da Management Rel'iew Vo/. 30 No. 1,2010 41
and OTC companies which have announced private common stock placement for the first time during the period from October, 2005 to March, 2008. The event date of private placement was set to "the date being public disclosed in Market Observation Post after the directors meetings approve private placements". Event study method was adopted to examine whether cumulative average abnormal retums exist after private placement announcements. The resu1t shows that: the CAAR of the period from 30 days before the event date to 30 days after that, the CAAR[-30,+30] is 9.38%, which is consistent with the findings by Hertzel and Smith (1993) and Wruck (1989) th剖 private placement announcements have information effects of positive influences on abnormal returns. It is found in this study that: after the Financial Supervisory Commission enhanced the management regulations of posterior information disclosure in 2005 due to the stock speculation to embezzle company money by private placement, the private placement announcement information has information content and has significant positive influence on shareholders' wea1th
In addition, the cumulative average abnormal return from the event period to the day before announcement, the CAAR[-30,-I] is 5.89%, while the cumulative average abnormal retum from announcement day to 30 days after announcement (CAAR[0,+30]) is 3.66%. It is higher before announcement date CAAR (CAAR[-30,-I]) than after (CAAR[0,+30]). Furthermore, cumulative average abnormal return since 27 days before announcement to 30 days after shows significantly at 5%. This means since 27 days before submitting the proposal of private placement to the directors meeting, the stock price of the company has already started to show a positive reaction. Because before announcement, only insiders or investors being contacted can know about the private placement while ordinary investors can't, the significant cumulative average abnormal return represents the information asymmetry does exist in private placement events. For minority shareholders, under the influence of information asymmet旬， the fairness of market transaction. and investors' interests wiI1 be harmed. This phenomenon can be considered as reference for fu仙re
amendment of private placement related regulations for the authority. Or by adopting disgorgement regulations, the fairness of market transaction can be
42
strengthened
Effects on Shareholders' Wealth and Premiumρiscounυ
of Private Placemel叫 nnouncemen
In the aspect of the influential factors of facilitating abnorrnal returns after private placement announcement, it is found that if a listed and OTC company serves its purpose oftransferring managerial rights via private placement, then the cumulative average abnormal return in the event period is up to 40.28%. The cumulative average abnorrnal return of companies without transferring their managerial rights is only 8.12%, aIthough positive. According to the result of multiple regression analysis,“whether managerial rights have been transferred" is an important influential factor which facilitates abnorrnal retums after private placement announcement. In general, although small investors cannot become particular private placement investors for potential abnorrnal return. This can be considered as a reference indicators to make decision of whether to invest and the holding period after knowing about there will be a new management team after
private placement. The result in this study is consistent with Hertzel and Rees
(1998): by announcing the launch of private equity placement, beneficial inforrnation on corporate future surplus can be delivered to external investors
In the aspect of the influential factors of facilitating premium (discount) rate of private placement, it is found in this study that: the relationship between
“
ratio of insiders' share amount in private placement to the total share amount in that p討vate placement" and premium (discount) is not significant, unlike Wu's inference (2004) that discount is highly related to managers' self-dealing. This implies that under the circumstance that the Financial Supervisory Commission had already enhanced regulations on private placement and requested independentexpe前正 opinions being disclosed when the difference of private placement share price and the reference price is over 20%, there is no significant evidence of insiders taking advantages by high-rate discounts. In addition,“purpose of private placement is to attract strategic partners" and
“
number of directors or supervisors seats investors obtained in the private placement" are the significant influential factors which facilitate discount after private placement announcement. It shows that private placement equity issuing companies try to attract strategic alliancepa此ners by increasing capital with lower share price. And there is evid
Chiao Da Afanagement Review Vo/. 30入fo. 1,2010 43
attracting outsiders to invest and join management teams of the companies by increasing capital in discounts
6.2.
SuggestionsCurrently, although the authority has already set up standards for private placement information disclosure through laws, and created a “private placement area" in the "Market Observation Post," still there are neither statistical analyses nor summaries for private equities cases. Therefore, in retrieving study data, it is still necessary to interpretation and summarizes them with the help of company annual reports or major information before/after the period. In addition, because private placement can be launched within a year after the resolution day, in this period of time and after private placement, there is always capital decrease or managerial rights transfer and other important matters. It is suggested that in the
futu悶， researchers should also consider the major events before/after private placement announcement and include them into cross analysis as variables when colleting research samples, in order to identify more precisely the influence of private placement on shareholders' weaIth, reasonability of private placement pricing, and information contents of private placement.
In this study, the premium (discount) is calculated with the difference of private placement ac仙al price announced by issuing company and the reference price according to the law, however there is no specific regulations of the pricing day to calculate the reference price. And most private placement issuing enterprises still authorize the directors meeting to decide the pricing day. This leads to the fact that the directors meeting can choose a time point which is favorable to specifíc private placement investors as the pricing day. In order to further understand the factors of premium (discount) rate, it is suggested that in the fuωre researches, the causes of stock price variation on the pricing date or the period of pricing data and directors meeting has announced the private placement, which should be included as adjustment reference, to fínd out whether the directors meeting chooses a date of low share price on pu巾的試 so that specifíc private placement investors can buy shares in private placement with substantial discount. Also, for the private placement cases which have to disclose
44 EjJects on Shareholders' Wealth and Premium (Discount) 0/ Private Placement Anl10uncement
independent experts' opinions according to the rule of the difference between private placement share price and reference price exceeding 20%, in the future researches, the reason why their premium (discount) is rather high can also be future explored.
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