The Study on the Relationship between Stock of Private Placements and Business Performance

• Main Authors: Li-Ling Tsai, 蔡莉玲
• Other Authors: KAO, LI HUA
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/52526307155425651057

碩士 === 中原大學 === 會計研究所 === 96 === The system of private placement was established by government with the expectation that multiple channels of fund-raising provided for companies would, by utilizing the fund coming from the private placement, improve their financial affairs and performances. However, since the introduction of private placement, many problems derived from the operation of securities arose. This study first explores whether the performances of companies utilizing capital increase by cash are superior to those of companies utilizing private placement. In other words, the major purposes of this study are to find out if there are any significant differences between capital increase by cash and private placement and to explore the factors influencing business performance by using companies currently utilizing private placement as study samples. The findings of this study are as follows: 1. Financial Affairs: The indexes of the abilities of debt paying, profit making and cash flow of companies utilizing capital increase by cash were significantly better than those companies utilizing private placements were, and this result corresponds to the Pecking Order Theory. 2. By using regression analysis of the samples of private placements to study the variants of growth rate of capital expenditure, the growth rate of business scale, the scale of capital increase by cash, price increase per share, purpose of capital increase by cash and the stock holding ratio of internal personnel, five results were found: (1) Growth Rate of Capital Expenditure: As to the dependable variables of the index of the ability of debt paying (cash flow and interest cover ratio) and the index of profit making (shareholder equity, ROE and earning per share), there is a significant relationship between the growth rate of capital expenditure and the performance of companies utilizing private placement. The positive correlation shows that if there is investment after the capital increase by cash of a company, the performance will be better. Truement’s research (1986) claimed that capital expenditure had a positive effect on company’s values and Cheng’s study (1995) suggested that the performance of companies issuing equity securities would worsen if there were no investment; however, this effect would not be seen in the companies that did invest. The empirical proofs researched match the findings of Truement and Cheng’s studies. (2) Growth Rate of Business Scale: The 13 indexes of the five facets of the financial structure all indicate that significance exists between the growth rate of business scale and the business performance of the companies utilizing private placement, and there are positive correlations. This means that the bigger the business scale is, the better the performance of the companies utilizing private placement will be. (3) Scale of Capital Increase by Cash: As for the dependable variables such as the index of debt paying ability (current ratio, interest cover ration) and the index of ability of running business (inventory turnover and total assets turnover), a significance exists between the scale of capital increase by cash and the business performance of the companies utilizing private placement. Such correlations are negative which means that the bigger the demand of the capital, the higher the debt ratio and the interest expense will be. This would decrease the current ratio and the interest cover ratio. (4) Price Increase per Share: This was found only in the index of growth such as the growth rate of profit margin indicating that significance exists between the scale of capital increase by cash and the business performance of the companies utilizing private placement. Such correlation is positive. (5) Purpose of Capital Increase by Cash: This was evidenced in the indexes of the ability of profit making and the current ratio. This means that significance exists between the purpose of capital increase by cash and the business performance of the companies utilizing private placement and the correlation is negative. This indicates that if the purpose of capital increase by cash is to improve operational capital and to pay debt, the benefit will not be too great if the conditions of profit making are unfavorable. In addition, the capital increased will not significantly affect the condition of profit making. (6) Stock Holding Ratio of Internal Personnel: No significance was found between the stock holding ratio of internal personnel and the business performance of the companies utilizing private placement in any of the 13 indexes of the five facets of the financial structure. No supporting evidence was found to support either the hypothesis of information transmission or the hypothesis of interest constringency/pillage.