The Effects and Determinants for Firms Selecting Capital Reduction – Evidence from TSE Manufacturing Firms

• Main Authors: Shu-Fang Hsu, 徐淑芳
• Other Authors: Jia-Hui Lin
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/69624538003117393679

碩士 === 台南應用科技大學 === 商學與管理研究所 === 99 === Capital reductions have been used to adjust financial structure and to improvement operating performance for many listed company in recent years. This paper attempts to study the effects of capital reduction on abnormal returns under different economic environment (bull and bear markets), different capital reduction purposes (capital reduction for eliminate accumulated losses (CREL),capital reduction for return cash to shareholder (CRRS) and capital reduction for eliminate losses and lead into new capita(CRNC)) and different industry (electronics industry or non-electronics industry). This paper also discusses capital reduction decisions and the determinants of alternative capital reduction. This paper uses event study to explore the effects of capital reduction on abnormal return under different markets, purposes and industry. The logistic model is used to estimate the probability of selecting a type of capital reduction. The evidence suggests that: 1. The announcement of capital reduction will result in negative abnormal returns whenever in bull or bear market. The negative abnormal returns will be more serious in bear market. 2. In regard to the announcement of CRRS, CREL and CRNC, The investor view that the effect of CRRS is batter than CREL and CRNC. 3. The electronics industry has some characteristics, including shorter industrial cycle, larger capital requirements and higher risk in Taiwan. The negative abnormal returns will be more serious in electronics industry than non- electronics industry. 4. The listed company with low per share of net assets, debt ratio, and higher common stock tend to select eliminating losses by reducing capital. This also shows that has stronger demand of operation funds for loosed company. To avoid the loss of company, the stop trading or financing trading of stock, the loss company will rise in the probability of capital reduction.