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Equity financing capacity and stock returns: Evidence from China

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  • Fonseka, M.M.
  • Samarakoon, Lalith P.
  • Tian, Gao-Liang

Abstract

We examine the relation between the capacity for financing through rights and seasoned public offers of equity and subsequent stock returns in China. The results show that the capacity for rights and public offers is reliably negatively related with future returns for firms that met regulatory criteria. Further, the capacity for rights offers is strongly negatively related with returns for firms that met the criteria and applied for approval, and for firms that issued equity after meeting the criteria and obtaining approval. Thus, there is clear evidence of a negative relation between equity financing capacity and stock returns in China.

Suggested Citation

  • Fonseka, M.M. & Samarakoon, Lalith P. & Tian, Gao-Liang, 2012. "Equity financing capacity and stock returns: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(5), pages 1277-1291.
    • Handle: RePEc:eee:intfin:v:22:y:2012:i:5:p:1277-1291
    DOI: 10.1016/j.intfin.2012.07.004
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    4. Fonseka, M.M. & Colombage, Sisira R.N. & Tian, Gao-Liang, 2014. "Effects of regulator's announcements, information asymmetry and ownership changes on private equity placements: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 126-149.
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    6. Sihai Li & Huiying Wu & Xianzhong Song, 2017. "Principal–Principal Conflicts and Corporate Philanthropy: Evidence from Chinese Private Firms," Journal of Business Ethics, Springer, vol. 141(3), pages 605-620, March.

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