Effects of regulator's announcements, information asymmetry and ownership changes on private equity placements: evidence from China

In response to the China Securities Regulatory Commission s regulation of private equity placements (PEP) in 2006, this study investigates the impact of the announcements of PEP applications, withdrawals, rejections, approvals, and completions on the returns of the firms that issue private equity (PE) and the factors that influence market reactions to these announcements. The results show that issuing firms experience stock price responses only to the announcements of PE applications, approvals, and completions. The announcement effect is positively related to the market discount, proceeds from private placements, and private institutional buying and ownership changes; and negatively related to government or government institutional buying and changes in the ownership of management buyers.