The role of existing shareholders in private equity placements in China
研究中国上市公司私募配售中现有股东参与对定价和长期回报的影响，发现其参与导致更高折价和异常回报，但背后是隧道行为而非业绩改善，对关注公司治理和投资者保护的学者有参考价值。
Abstract In this article, we investigate how the participation of firms’ existing shareholders affects the pricing and valuation of private investments in public equity (PIPEs). Using a large sample of PIPEs issued by Chinese listed firms from 2006 to 2019, we find that the effective discount and long‐term buy‐and‐hold abnormal stock returns of PIPEs with existing shareholder participation are significantly higher than those with only new investor participation, after controlling for heterogeneous types of PIPE investors. However, the superior post‐PIPE stock performance of deals with existing shareholders is not driven by improved operating performance but by tunneling activities such as frequent dividend announcements, related‐party transactions, and positive earnings management during the lock‐up period. Our findings suggest that the effect of existing shareholders’ participation in private equity placements is more consistent with the tunneling hypothesis than the certification hypothesis. We document that the tunneling incentives are stronger when firms face greater financial constraints and can be mitigated when the firm's corporate governance is stronger.