The Choice between Public Offering and Private Placement: New Insights from Chinese Data

摘要

We develop and test a logistic regression model to examine how companies choose between public offering and private placements in China. Three findings emerge. First, profitability is one of the most important factors that influence on the choices of SEO. Companies that cannot make enough profits without qualifications for public offering are more likely to choose private placement. This evidence indicates that the choice of SEO in China is most influenced by relevant regulations and that listed companies have equity financing preference. Second, the impact of information asymmetry and the pressure of demand for fund are also important factors. Small companies tend to reduce the risk of issue failure; Companies with high debt ratio tend to meet the demands for fund. Finally, control benefit is another factor which influences the ways of SEO. Block holders with higher initial stakes are under little risk of losing their control power. So they tend to choose private placement, especially to new institutional investors instead of current investors.