Abstract

This thesis examines the announcement effect for seasoned equity offerings in the Chinese stock market. Our sample covers the period of 1993 to 2003 and includes 567 A-share rights issues and 72 public offerings for firms listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange. We document a statistically significant fall in the value of common stock on the announcement days for both rights issues and public offerings in China, which is consistent in sign with the evidence reported for the U.S., U.K. and France. These negative abnormal returns are primarily explained by certain unique characteristics of the Chinese stock market and its SEOs. Specifically, we find that the announcement effects are positively related to the state-owned share percentage of Chinese listed firms, and that the relatively greater stock price underperformance of public offerings versus rights issues in the Chinese market is due primarily to the higher percentage of state-owned shares and to a lesser extent the relative issue size limit imposed on rights issues. Hence, we suggest that the Chinese regulatory authority remove the issue size limit imposed on rights issues.