Ning, Yuping; Rohaya Abdul Jalil
A icle
Indus ial policy en i onmen and p i a e equi y
placemen : E idence om Chinese eal es a e i ms
Economies
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Sugges ed Ci a ion: Ning, Yuping; Rohaya Abdul Jalil (2024) : Indus ial policy en i onmen and
p i a e equi y placemen : E idence om Chinese eal es a e i ms, Economies, ISSN 2227-7099,
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Ci a ion: Ning, Yuping, and Rohaya
Bin i Abdul Jalil. 2024. Indus ial
Policy En i onmen and P i a e
Equi y Placemen : E idence om
Chinese Real Es a e Fi ms. Economies
12: 279. h ps://doi.o g/10.3390/
economies12100279
Academic Edi o : Robe Czudaj
Recei ed: 31 July 2024
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Published: 16 Oc obe 2024
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economies
A icle
Indus ial Policy En i onmen and P i a e Equi y Placemen :
E idence om Chinese Real Es a e Fi ms
Yuping Ning * and Rohaya Bin i Abdul Jalil
The Depa men o Real Es a e, Facul y o Buil En i onmen and Su eying, Uni e si i Teknologi Malaysia,
UTM Skudai, Joho Bah u 81310, Malaysia; [email p o ec ed]
*Co espondence: [email p o ec ed]
Abs ac : O e he pas ou decades, China’s eal es a e indus y has expe ienced apid g ow h, ac-
companied by equen egula o y in e en ions. These shi s p esen an ideal con ex o examining
he cha ac e is ics o p i a e equi y placemen s (PEPs) unde a ying indus ial policy en i onmen s.
This s udy examines he PEPs o Chinese eal es a e i ms om 2006 o 2023, calcula ing he cumula-
i e abno mal e u ns du ing announcemen pe iods and he ansac ion discoun s ac oss a ious
egula o y phases. The analysis e eals signi ican posi i e announcemen e ec s, e en in imes o
policy igh ening, wi h hese e ec s becoming mo e p onounced du ing pe iods o policy elaxa ion.
Howe e , eg ession analyses sugges ha he policy en i onmen does no signi ican ly impac he
announcemen e ec s. Con a y o adi ional iews, PEP discoun s end o be shallowe du ing
policy igh ening and deepe du ing policy loosening. Fu he analysis indica es ha in es o s a e
willing o accep smalle discoun s in exchange o mo e aluable in es men oppo uni ies.
Keywo ds: PEP ansac ion; Chinese eal es a e companies; indus ial policy en i onmen ; announce-
men e ec ; discoun ; ce i ica ion e ec
1. In oduc ion
Dis inc om public o e ings, p i a e equi y placemen s (PEPs) in ol e he issuance
o new sha es o a selec ed g oup o sophis ica ed in es o s, such as in es men banks o
unds (W uck 1989). PEPs ha e eme ged as a i al e inancing ool ac oss a ious coun ies
and ma ke s. Fo ins ance, B ophy e al. (2004) no ed ha und aising h ough PEPs in he
U.S. g ew om 8.1 billion USD in 1990 o app oxima ely 154 billion USD by 2000. Simila ly,
Xu e al. (2017) epo ed ha PEP capi al in Aus alia inc eased nea ly 20- old be ween
1995 and 2009. A simila upwa d end has also been obse ed in Eas Asia (Baek e al.
2006;Ka o and Schallheim 1993).
Ma ke eac ions o PEPs, in con as o o he ypes o seasoned equi y o e ings (SEOs),
ha e ga ne ed conside able schola ly a en ion. Fo ins ance, a me a-analysis by Veld e al.
(2020) ound ha he a e age cumula i e abno mal e u n (CAR) o SEOs was
−
0.98%,
wi h a median o
−
1.39%. Howe e , posi i e announcemen e ec s ha e been documen ed
ac oss a ious ma ke s (He zel and Smi h 1993;Ka o and Schallheim 1993;W uck 1989;
Xu 2010;Zhang 2007). Ne e heless, mos exis ing esea ch has been based on ma ke -wide
samples. Fo example, W uck (1989), He zel and Smi h (1993), and Ba clay e al. (2007)
ocused on he U.S. ma ke , while C onq is and Nilsson (2004) examined he Swedish
ma ke . S udies on he Chinese ma ke include hose by Zhang and Li (2008) and Xu (2010).
Howe e , esea ch on PEPs om an indus y pe spec i e is ela i ely spa se. Fo
example, Fol a and Janney (2004) in es iga ed he U.S. bio echnology sec o , inding ha
PEPs help o mi iga e long- e m in o ma ion asymme y issues. Lin and Gannon (2007)
obse ed a nega i e announcemen e ec in he Aus alian bio ech and heal hca e sec o s,
con a y o he posi i e p ice eac ions commonly epo ed. This sugges s ha indus y-
speci ic cha ac e is ics may in luence he dynamics o PEPs di e en ly.
Economies 2024,12, 279. h ps://doi.o g/10.3390/economies12100279 h ps://www.mdpi.com/jou nal/economies
Economies 2024,12, 279 2 o 29
Exis ing esea ch has no ully in es iga ed PEPs a he indus y le el, while he
Chinese eal es a e sec o o e s a unique and aluable amewo k o such s udies. O e
he pas o y yea s, China’s apid economic de elopmen has been la gely d i en by he
eal es a e sec o . Unde go e nmen in e en ion, he eal es a e indus y has wo ked
closely wi h local go e nmen s and he adi ional banking sys em o g ow in o a key
engine o China’s economic g ow h (Xiong 2023). Howe e , his apid de elopmen has
also accumula ed signi ican isks. Fo ins ance, Fang e al. (2016) highligh ed ha he
imbalance be ween high housing p ices and esiden incomes has ele a ed household deb
le els, which may hinde u u e consump ion capaci y. Addi ionally, declining bi h a es
exace ba e he supply–demand imbalance (Xiong 2023). Xiong u he accen ua ed ha ,
while high le e age in eal es a e companies is no inhe en ly p oblema ic, i becomes a
signi ican isk in he con ex o sluggish economic eco e y and equen go e nmen
in e en ions. In ecen yea s, he liquidi y c ises con on ed by eal es a e companies, such
as China E e g ande, ha e been la gely a ibu ed o he “Th ee Red Lines” policy. This
policy, in oduced by he cen al go e nmen in 2020, imposes s ic egula ions on he
deb a ios o eal es a e i ms (Bohnenkamp and Kammann 2024). This unde sco es he
subs an ial impac o go e nmen policy on he de elopmen o en e p ises wi hin he
sec o . No o he indus y in China has been subjec o such sus ained public sc u iny and
long- e m egula o y in e en ion aced by he eal es a e sec o .
China’s eal es a e sec o does no expe ience la ge economic cycles, making i an
ideal en i onmen o s udying he impac o policy changes. Gi en i s c i ical ole in
China’s economy, local go e nmen o icials o en p io i ize eal es a e de elopmen as a
means o boos local economic g ow h, which, in u n, a ec s hei ca ee ad ancemen .
Consequen ly, adjus ing he eal es a e policy has become a ool o he cen al go e nmen
o egula e economic g ow h.
1
As Xiong (2023) no ed, “When he eal es a e ma ke is unde
dis ess, he cen al go e nmen may adjus i s mac oeconomic and mone a y policies and loosen
mo gage equi emen s o suppo he ma ke , while local go e nmen s may ake di ec measu es o
p e en eal es a e p ices om alling”. An and Wang (2013) u he con i med ha eal es a e
egula o y policies a e key de e minan s o housing p ices. These egula o y measu es
ypically include managing land supply, implemen ing a o dable housing policies, and
le e aging iscal and inancial ools. These s a egies ac as c ucial mechanisms h ough
which he go e nmen exe cises con ol o e he eal es a e ma ke .
As a capi al-in ensi e indus y, he eal es a e sec o has a s ong demand o inanc-
ing. Reliance on adi ional bank inancing inc eases he deb bu den, whe eas PEPs can
e ec i ely mi iga e his issue. Ning and Jalil (2023) a gued ha PEPs, as a o m o eq-
ui y inancing, no only help o educe he deb a ios o eal es a e companies, bu also
alle ia e liquidi y issues. Song e al. (2024) ound ha excessi ely le e aged i ms can
mi iga e hei inancing cons ain s h ough PEPs, he eby enhancing he i ms’ alue.
Mo eo e , PEPs se e a ce i ica ion unc ion, helping o ease in o ma ion asymme y and
imp o e long- e m co po a e go e nance (He zel and Smi h 1993;Ning and Jalil 2023;
W uck 1989
). The e o e, i is o g ea signi icance o unde s and how PEPs combine wi h
indus y cha ac e is ics o imp o e he quali y o eal es a e en e p ises.
This s udy aims o explo e how indus y cha ac e is ics in luence PEPs, wi h a pa icu-
la ocus on he impac o he policy en i onmen on sec o -speci ic e inancing ac i i ies.
Speci ically, we seek o de e mine whe he he announcemen e ec s o PEPs in di e en
indus y policy en i onmen s align wi h hose obse ed in ma ke -wide s udies. Does
he ma ke eac mo e posi i ely du ing pe iods o policy elaxa ion compa ed o pe i-
ods o igh ening? Is he indus y policy en i onmen a signi ican ac o in de e mining
ansac ion p icing?
Typically, shi s in he policy en i onmen can eshape in es o s’ expec a ions ega d-
ing he ou comes o PEPs. Du ing pe iods o policy elaxa ion, mo e lenien inancing
condi ions and ewe ansac ion es ic ions os e op imism o s onge p ope y sales,
p omp ing i ms o agg essi ely bid o land and expand hei p ojec s. Consequen ly, he
ma ke an icipa es his inc ease in supply and demand, leading o mo e posi i e eac ions.
Economies 2024,12, 279 3 o 29
In con as , du ing he policy- igh ening pe iod, in es o s become mo e cau ious, adjus ing
hei p icing s a egies o accoun o ampli ied isks. Ne e heless, hey also need o ec-
ognize ha companies app o ed by he China Secu i ies Regula o y Commission (CSRC)
unde s ic e policies a e likely o ha e s onge managemen and highe -quali y asse s.
As a esul , PEP p icing e lec s a balance be ween hese isks and quali y signals.
Ou s udy e eals ha PEPs in Chinese eal es a e companies exhibi a signi ican
posi i e announcemen e ec , e en du ing pe iods o policy igh ening. This posi i e e ec
is e en mo e p onounced du ing pe iods o policy elaxa ion. While he policy en i onmen
is no a key de e minan o PEP announcemen e ec s, i plays a c ucial ole in PEP p icing.
Con a y o adi ional iews, PEP discoun s end o be shallowe du ing ma ke igh ening
and deepe du ing pe iods o elaxa ion. We a gue ha companies success ully execu ing
PEPs a e o a highe quali y and a e capable o s anding ou e en in un a o able policy
en i onmen s. Fu he analysis e eals ha ansac ions in ol ing majo sha eholde s
in ol e lowe discoun s, and he long- e m e u ns o PEPs a e signi ican ly posi i e,
in con as o he gene ally nega i e ou comes epo ed in o he s udies. The e idence
sugges s ha in es o s a e willing o accep shallowe discoun s in exchange o aluable
in es men oppo uni ies, a he han being de e ed by ad e se indus y policies.
The indings also indica e ha ma ke sen imen , p oceeds, le e age changes, and
managemen expenses signi ican ly in luence he announcemen e ec s o PEPs in eal
es a e companies. A close examina ion o le e age changes e eals ha he ma ke ’s
pe cep ion o eal es a e i ms’ in es men ac i i ies a ies depending on he indus y’s
de elopmen s age. The ma ke esponds posi i ely o p oac i e managemen ac ions,
e lec ing i s encou agemen o companies ha seize g ow h oppo uni ies. Du ing pe iods
o policy elaxa ion, he ma ke ends o ocus mo e on ansac ion- and i m-speci ic
cha ac e is ics, whe eas, du ing pe iods o igh ening, in es o sen imen akes p ecedence.
In addi ion o he policy en i onmen and majo sha eholde in ol emen , he p icing
model plays an impo an ole in p icing nego ia ion. Speci ically, du ing policy- igh ening
pe iods, in es o s no only pay a en ion o he signals con eyed by majo sha eholde
pa icipa ion, bu also emain cau ious abou hei mo i es, pa icula ly conce ning po en ial
unneling beha io s. The signi ican ela ionship be ween p oceeds, ac ions placed, and
discoun a es suppo s he ce i ica ion (in o ma ion) hypo hesis (He zel and Smi h 1993).
In e es ingly, he e is a posi i e co ela ion be ween owne ship balance and discoun a es
du ing pe iods o policy elaxa ion. This sugges s ha in es o s ea ha dec eased majo
sha eholde con ol could lead o missed oppo uni ies in a a o able en i onmen , causing
hem o demand highe discoun s as compensa ion o his unce ain y. O e all, ou
indings no only suppo he ce i ica ion hypo hesis, bu also highligh how changes in
he policy en i onmen and indus y cha ac e is ics shape PEP ansac ion dynamics.
The emainde o his pape is s uc u ed as ollows: Sec ion 2p o ides a li e a u e
e iew and esea ch hypo heses; Sec ion 3de ails he da a selec ion, calcula ion me hods,
and a iable de ini ions; Sec ion 4p o ides an o e iew o he eal es a e policy e olu ion
his o y and backg ound in o ma ion o PEPs in China, and hen analyses he impac o
indus y policy en i onmen s on announcemen e ec s and discoun a es; and Sec ion 5
summa izes he key indings, esea ch limi a ions, and implica ions.
2. Li e a u e Re iew and Hypo heses
2.1. Li e a u e Re iew
Typically, co po a e e inancing ac i i ies, such as SEOs, o en elici nega i e ma ke
eac ions. This is a ibu ed o he belie ha in o med manage s, who possess supe io
in o ma ion, end o issue new sha es when hey pe cei e he company’s s ock o be
o e alued (Mye s and Majlu 1984). Howe e , a subs an ial body o esea ch has docu-
men ed ha PEPs gene ally exhibi posi i e announcemen e ec s. W uck (1989) epo ed
ha companies expe ienced an a e age weal h gain o app oxima ely 4.5% du ing he
announcemen pe iod, and his inding was co obo a ed by subsequen s udies on he U.S.
ma ke (Ba clay e al. 2007). Simila posi i e announcemen e ec s ha e been obse ed in
Economies 2024,12, 279 4 o 29
o he ma ke s, including hose o Japan, Singapo e, and Sweden (C onq is and Nilsson
2004;Ka o and Schallheim 1993;Tan e al. 2002). In China, his phenomenon has also been
documen ed (Hu and Zhang 2016;Sun 2015;Wu 2016;Zhang and Guo 2009). Fo example,
Zhang (2007) ound ha he a e age cumula i e abno mal e u ns (CARs) in he e en
windows [
−
10, +5] and [
−
5, +5] we e 8.59% and 7.20%, espec i ely. Fu he mo e, s udies
ha e con i med ha PEPs gene ally lead o an inc ease in p ope y i m alues du ing he
announcemen pe iod in China (Liu 2008;Zhang 2017;Zhou 2016).
Ano he no able cha ac e is ic o PEPs is he issuance o sha es a a discoun . He zel
and Smi h (1993) ound ha PEPs in he U.S. ma ke we e ypically issued a a discoun
o a ound 20%, a esul echoed by Ba clay e al. (2007). Xu e al. (2017) epo ed ha he
a e age PEP discoun in he Aus alian ma ke was app oxima ely 7%, while he igu e
was a ound 12% in Japan (Ka o and Schallheim 1993). S udies ha e also con i med he
p esence o discoun ed p icing o PEPs in China (He and Zhu 2009;Song e al. 2019;Yu
e al. 2013;Zhang and Guo 2009;Zhang and Li 2008).
The li e a u e also highligh s nega i e long- e m pe o mances ollowing PEPs. Ba clay
e al. (2007) documen ed a pos -e en s ock p ice decline o app oxima ely 9.8% wi hin
six mon hs. W uck and Wu (2009) obse ed a CAR o
−
25.27% o e h ee yea s. Simila
nega i e long- e m pe o mances ha e been obse ed in Eas Asian ma ke s (Baek e al.
2006;Kang e al. 1999;Ka o and Schallheim 1993). Howe e , e idence om he Chinese
ma ke is mixed. Geng e al. (2011) and Yu e al. (2016) iden i ied a nega i e long- e m
pe o mance, whe eas Dong e al. (2020) epo ed posi i e long- e m ou comes. Louisiana
e al. (2007) ound ha p i a e placemen in eal es a e in es men us s (REITs) exhibi ed
a posi i e long- e m pe o mance, which is consis en wi h he indings o Zhou (2016) on
he Chinese eal es a e indus y.
The exis ing li e a u e explains PEP dynamics p ima ily h ough he lenses o agency
heo y, in o ma ion asymme y, and beha io al inance. W uck (1989) sugges ed ha PEPs
enhance co po a e go e nance by in ol ing ex e nal in es o s, he eby inc easing i ms’
alue. Ba clay e al. (2007) p oposed he manage ial en enchmen hypo hesis, posi ing ha
mos in es o s pa icipa ing in PEPs a e passi e, and ha discoun s se e as compensa ion
o no opposing managemen ’s ac ions. Zhang e al. (2021) explo ed he po en ial o con-
olling sha eholde s o exp op ia e mino i y sha eholde s’ in e es s h ough PEPs, linking
he phenomenon o agency con lic s. The ce i ica ion hypo hesis, an ex ension o he in o -
ma ion asymme y hypo hesis (Mye s and Majlu 1984), posi s ha , as PEP in es o s a e
ypically sophis ica ed and well-in o med, hei pa icipa ion signals he company’s high
quali y o unde alua ion, leading o posi i e ma ke eac ions (He zel and Smi h 1993);
he au ho s u he a gued ha hese discoun s a e a kind o compensa ion o in es o s,
who spend esou ces o acqui e accu a e in o ma ion abou a company. Addi ionally, he
o e -op imism hypo hesis sugges s ha sho - e m posi i e ma ke eac ions a e d i en by
in es o s’ in la ed expec a ions o u u e gains, which a e la e co ec ed as s ock p ices
e e o hei in insic alues (He zel e al. 2002;Ma ciukai y e e al. 2005).
The eal es a e ma ke is also signi ican ly impac ed by indus y-speci ic egula o y
laws. Fo ins ance, Chen and Lin (2013) ound ha a ious egula o y policies in luence
eal es a e p ices by adjus ing supply and demand ela ionships, based on hei s udy o
comme cial eal es a e in Shenzhen, China. Li e al. (2014) obse ed ha ma ke ola ili y
inc eases du ing pe iods o igh ening. Ge e al. (2023) con i med ha s ic e c edi policies
o eal es a e i ms educe in es men in bo h he eal es a e and manu ac u ing sec o s,
con ibu ing o cyclical luc ua ions in he Chinese economy.
2.2. Hypo heses
Based on he exis ing li e a u e, we an icipa ed ha PEPs in Chinese eal es a e i ms
would exhibi signi ican posi i e announcemen e ec s. The moni o ing hypo hesis sug-
ges s ha ex e nal in es o s exe g ea e o e sigh , educing agency cos s and elici ing
posi i e ma ke eac ions (W uck 1989). These e ec s a e likely o a y depending on he
p e ailing policy en i onmen wi hin he indus y. F om he pe spec i e o he asymme ic
Economies 2024,12, 279 5 o 29
in o ma ion hypo hesis, Mye s and Majlu (1984) a gued ha manage s o unde alued
i ms wi h limi ed inancial lexibili y may o go issuing equi y, e en when aced wi h
p o i able in es men oppo uni ies, leading o an unde in es men p oblem. He zel and
Smi h (1993) p oposed ha , as PEPs in ol e ewe in es o s, hey can mo e e ec i ely sig-
nal a i m’s ue alue while minimizing in o ma ion cos s. This p oblem can be alle ia ed
when inancing cons ain s a e eased du ing pe iods o policy elaxa ion. The o e eac ion
hypo hesis sugges s ha in es o s o en o e es ima e challenges du ing pessimis ic pe iods
and o e es ima e oppo uni ies du ing op imis ic imes (He zel e al. 2002). The ma ke
may o e eac o pe cei ed inancing and sales di icul ies in imes o policy igh ening,
esul ing in mo e un a o able sho - e m ma ke eac ions. Con e sely, du ing pe iods
o policy elaxa ion, in es o s end o be mo e op imis ic, which leads o mo e a o able
announcemen e ec s.
Figu e 1illus a es he equilib ium o capi al supply and demand o eal es a e
companies unde di e en policy en i onmen s. In he diag am,
Sn
and
D0
ep esen
he supply and demand cu es unde a neu al policy en i onmen , espec i ely, wi h
En
indica ing he equilib ium poin . When he go e nmen announces a mo e a o able
inancing policy, he capi al supply inc eases, leading o a new equilib ium poin (
Ex
) in
Figu e 1a, whe e he cos o capi al (
px
) dec eases. Con e sely, in Figu e 1b, unde igh e
policy condi ions, he cos o capi al (p ) ises.
Economies 2024, 12, x FOR PEER REVIEW 5 o 28
in o ma ion hypo hesis, Mye s and Majlu (1984) a gued ha manage s o unde alued
i ms wi h limi ed inancial lexibili y may o go issuing equi y, e en when aced wi h p o -
i able in es men oppo uni ies, leading o an unde in es men p oblem. He zel and Smi h
(1993) p oposed ha , as PEPs in ol e ewe in es o s, hey can mo e e ec i ely signal a
i m’s ue alue while minimizing in o ma ion cos s. This p oblem can be alle ia ed when
inancing cons ain s a e eased du ing pe iods o policy elaxa ion. The o e eac ion hy-
po hesis sugges s ha in es o s o en o e es ima e challenges du ing pessimis ic pe iods
and o e es ima e oppo uni ies du ing op imis ic imes (He zel e al. 2002). The ma ke
may o e eac o pe cei ed inancing and sales difficul ies in imes o policy igh ening,
esul ing in mo e un a o able sho - e m ma ke eac ions. Con e sely, du ing pe iods o
policy elaxa ion, in es o s end o be mo e op imis ic, which leads o mo e a o able an-
nouncemen effec s.
Figu e 1 illus a es he equilib ium o capi al supply and demand o eal es a e com-
panies unde di e en policy en i onmen s. In he diag am, 𝑆 and 𝐷 ep esen he sup-
ply and demand cu es unde a neu al policy en i onmen , espec i ely, wi h 𝐸 indica ing
he equilib ium poin . When he go e nmen announces a mo e a o able inancing policy,
he capi al supply inc eases, leading o a new equilib ium poin (𝐸) in Figu e 1a, whe e he
cos o capi al (𝑝) dec eases. Con e sely, in Figu e 1b, unde igh e policy condi ions, he
cos o capi al (𝑝) ises.
(a) (b) (c)
Figu e 1. (a) The equilib ium o capi al supply and demand du ing policy elaxa ion. (b) The equi-
lib ium o capi al supply and demand du ing policy igh ening. (c) The equilib ium o capi al sup-
ply and demand ollowing PEP ansac ions ac oss diffe en policy pe iods.
Assuming ha a eal es a e company conduc s iden ical PEPs in bo h policy en i on-
men s, he ma ke is likely o an icipa e a lowe weigh ed a e age cos o capi al du ing
pe iods o policy elaxa ion, p omp ing an upwa d e ision o he company’s alua ion and,
consequen ly, a mo e posi i e ma ke eac ion. In con as , du ing pe iods o policy igh en-
ing, highe capi al cos s lead o a mo e nega i e ma ke esponse. E en when accoun ing o
he inc eased capi al demands om eal es a e companies h ough PEPs, Figu e 1c shows
ha he weigh ed a e age cos o capi al (𝑝) du ing policy elaxa ion emains consis en ly
lowe han he cos o capi al (𝑝) du ing policy igh ening.
The e o e, we expec ma ke eac ions o be mo e posi i e du ing pe iods o elaxa ion
compa ed o pe iods o igh ening. Acco dingly, we p opose he ollowing hypo hesis:
H
1
: In Chinese eal es a e companies, he announcemen effec s o PEP ansac ions a e mo e pos-
i i e du ing pe iods o policy elaxa ion han du ing pe iods o policy igh ening.
S ic e inancing egula ions du ing policy- igh ening pe iods make i mo e di icul
o eal es a e en e p ises o ob ain capi al h ough adi ional inancial channels, leading
hem o u n o al e na e sou ces, such as PEPs. Highe discoun s a e expec ed as he de-
mand o unds ises. Fu he mo e, egula ions ha inc ease down-paymen equi emen s
and place es ic ions on eal es a e ansac ions o households u he educe sales
Figu e 1. (a) The equilib ium o capi al supply and demand du ing policy elaxa ion. (b) The
equilib ium o capi al supply and demand du ing policy igh ening. (c) The equilib ium o capi al
supply and demand ollowing PEP ansac ions ac oss di e en policy pe iods.
Assuming ha a eal es a e company conduc s iden ical PEPs in bo h policy en i on-
men s, he ma ke is likely o an icipa e a lowe weigh ed a e age cos o capi al du ing
pe iods o policy elaxa ion, p omp ing an upwa d e ision o he company’s alua ion
and, consequen ly, a mo e posi i e ma ke eac ion. In con as , du ing pe iods o policy
igh ening, highe capi al cos s lead o a mo e nega i e ma ke esponse. E en when
accoun ing o he inc eased capi al demands om eal es a e companies h ough PEPs,
Figu e 1c shows ha he weigh ed a e age cos o capi al (
px
) du ing policy elaxa ion
emains consis en ly lowe han he cos o capi al (p ) du ing policy igh ening.
The e o e, we expec ma ke eac ions o be mo e posi i e du ing pe iods o elaxa ion
compa ed o pe iods o igh ening. Acco dingly, we p opose he ollowing hypo hesis:
H1: In Chinese eal es a e companies, he announcemen e ec s o PEP ansac ions a e mo e
posi i e du ing pe iods o policy elaxa ion han du ing pe iods o policy igh ening.
S ic e inancing egula ions du ing policy- igh ening pe iods make i mo e di icul
o eal es a e en e p ises o ob ain capi al h ough adi ional inancial channels, leading
hem o u n o al e na e sou ces, such as PEPs. Highe discoun s a e expec ed as he
demand o unds ises. Fu he mo e, egula ions ha inc ease down-paymen equi e-
men s and place es ic ions on eal es a e ansac ions o households u he educe sales
Economies 2024,12, 279 6 o 29
e enue. Less a ailable land and mo e s ingen equi emen s o bidding on de elopmen
p ojec s exace ba e his si ua ion du ing pe iods o igh ening.
As discussed in Figu e 1, he e a e signi ican di e ences in he cos s o capi al unde
di e en policy en i onmen s. In es o s a e likely o demand highe discoun s du ing
pe iods o policy igh ening o compensa e o he inc eased isks associa ed wi h highe
capi al cos s and po en ial declines in company alue. Consequen ly, i is easonable o
expec ha PEP in es o s will equi e g ea e discoun s du ing pe iods o policy igh ening
compa ed o pe iods o elaxa ion, as ecompense o heigh ened isks and po en ial
dec eased p o i s. Based on his easoning, we p opose he ollowing hypo hesis:
H2: In Chinese eal es a e companies, he discoun a e o PEP ansac ions is lowe du ing pe iods
o policy elaxa ion han du ing pe iods o policy igh ening.
3. Me hodology
3.1. Da a Selec ion
This s udy ocuses on Chinese A-sha e lis ed eal es a e companies ha conduc ed
PEPs be ween 1 Janua y 2006 and 31 Decembe 2023. The da a we e sou ced om he
CSMAR da abase, excluding companies lis ed in Hong Kong due o he signi ican di e -
ences in p i a e placemen mechanisms. Unlike mainland China, equi y placemen s by
Hong-Kong-lis ed companies only equi e boa d app o al, wi hou addi ional egula o y
o e sigh .
2
This di e ence could in luence he esea ch esul s and in e p e a ions. Thus,
we excluded mainland eal es a e companies lis ed on he Hong Kong S ock Exchange om
his s udy. We selec ed his ime ame because PEP ansac ions in China commenced in
2006, and he eal es a e indus y did no expe ience signi ican luc ua ions in i s economic
cycle du ing his pe iod, p o iding an ideal con ex o analyzing he e ec s o policy
en i onmen s on PEPs.
To ensu e his s udy’s igo and ele ance, he sample was il e ed using he ollowing
c i e ia: (1) Only companies classi ied wi hin he eal es a e sec o a he ime o he PEP
ansac ion we e included.
3
(2) Companies ha engaged in o he e inancing ac i i ies
wi hin a yea be o e o a e he ansac ion we e excluded.
4
(3) Companies lacking a ailable
inancial o ansac ion da a we e excluded. (4) Cancelled ansac ions, un eco ded deals, o
hose s ill in p og ess we e excluded. (5) Companies wi h PT o ST s a us a he ime o he
ansac ion we e excluded.
5
(6) In cases whe e companies conduc ed wo PEP ansac ions
on he same day, ypically issuing sha es o asse pu chases and aising acquisi ion unds
h ough new sha es, he ansac ions we e consolida ed. This was conduc ed o accoun o
di e en p ices and sha e quan i ies, enabling accu a e calcula ions o he discoun a e o
he PEP announcemen e ec s udy.
6
A e consolida ing hese same-day ansac ions, he
inal sample consis ed o 126 e en s.
Addi ionally, o accoun o po en ial p ice disc epancies due o long ading suspen-
sions, ansac ions wi h suspension pe iods exceeding se en days we e excluded om he
announcemen e ec analysis. This adjus men esul ed in a inal sample o 109 e en s o
he announcemen e ec analysis.
The basic s a is ical desc ip ions o he sample companies a e summa ized in Table 1.
Table 1a p esen s key da a on he PEPs conduc ed by Chinese eal es a e companies. The
a e age discoun a e is 10.5%, wi h a median o 15.50%, which is consis en wi h indings
om he exis ing li e a u e. On a e age, he unds aised pe ansac ion amoun ed o
app oxima ely 3.32 billion CNY, wi h he issuance size ep esen ing 26.70% o he o al
sha es. The pa icipa ing companies ha e an a e age o al asse size o 30.70 billion CNY,
wi h a median o 8.05 billion CNY, sugges ing ha p ima ily small- o-medium-sized eal
es a e i ms end o engage in PEPs. The a e age owne ship s ake o majo sha eholde s is
39.79%, wi h a median o 41.26%, consis en wi h he indings o Chen and Wang (2005).
Such high le els o owne ship sugges ha he majo sha eholde s in hese eal es a e i ms
main ain subs an ial con ol o e he companies and a e less conce ned abou he dilu ion
o con ol h ough PEPs. Addi ionally, he a e age deb a io among he pa icipa ing
Economies 2024,12, 279 7 o 29
companies s ands a 66.20%, e lec ing he high le e age ypical o he sec o , as also
no ed in p io s udies (Fang e al. 2016;Xiong 2023). Finally, he a e age e u n on equi y
(ROE) o hese eal es a e i ms is 9.30%, and Tobin’s Q a io is 1.65, indica ing a s ong
p o i abili y and inancial heal h du ing he s udy pe iod.
Table 1. (a) Desc ip i e s a is ics. (b) S a is ics o PEPs ac oss di e en policy pe iods.
(a)
Va iable N Mean Median SD Max Min
Discoun 126 0.105 0.155 0.408 0.763 −1.847
F ac ion 126 0.267 0.229 0.190 1.189 0.015
P oceed 126 3.317 2.050 5.960 64.540 0.265
Fi m Size 126 30.695 8.045 90.627 856.203 0.119
Top1 126 39.792 41.260 17.070 89.410 6.500
Le e age 126 0.662 0.705 0.172 0.914 0.028
ROE 126 0.093 0.090 0.095 0.433 −0.315
Tobin’s Q 126 1.653 1.228 1.962 19.094 0.776
(b)
Policy En i onmen s F eq. Pe cen % Cum.%
Cases in Policy Relaxa ion Pe iod 61 48.41 48.41
Cases in Policy S ingen Pe iod 65 51.59 100
To al 126 100
No e: The calcula ion o he discoun a e ollows he me hod p oposed by W uck and Wu (2009), wi h he speci ic
o mula de ailed in Equa ion (6). The benchma k p ice o discoun calcula ion is de ined as he closing p ice on
he en h ading day a e he e en in his able. The p oceeds o he PEP ansac ion and company size a e bo h
measu ed in billions o CNY (Chinese Yuan).
Table 1b p esen s s a is ical da a on PEPs ac oss di e en policy en i onmen s. The
da a show a ela i ely balanced dis ibu ion o ansac ions be ween pe iods o policy
igh ening and elaxa ion, wi h 65 PEPs occu ing du ing igh ening pe iods and 61 du ing
elaxa ion pe iods.
3.2. Announcemen E ec Es ima ion
We employed he ma ke model app oach o De Jong e al. (1992) o es ima e abno mal
e u ns. The speci ic o mula used is as ollows:
Rj =αj+βjRm +εj (1)
whe e
is he day ela i e o he e en ;
Rj
is he e u n o company
j
on da e
;
Rm
is
he daily e u n o he Shanghai Real Es a e Indus y Index, used as a p oxy o he ma ke
po olio o isky asse s;
αj
is he in e cep o he equa ion;
βj
ep esen s he OLS es ima es
o company
j
’s ma ke model pa ame e s; and
εj
is he e o e m o company
j
on he
sample e en day .
The abno mal e u n (ARj ) o company jon da e is calcula ed as ollows:
ARj =Rj −αj+βjRm (2)
The
CART
j
is he cumula i e abno mal e u n (CAR) o company
j
o e he e en
window T, s a ing om he lowe bound o da e l, and is gi en as ollows:
CART
j=∑T
=lARj (3)
Economies 2024,12, 279 8 o 29
As desc ibed by W uck (1989) and He zel and Smi h (1993), we used he ollowing
o mulae o calcula e he adjus ed CAR and AR:
CART
j,adj =1
(1− ac ion)∗CART
j+ ac ion
(1− ac ion)∗(close −p ice)
close (4)
ARj ,adj =1
(1− ac ion)∗ARj + ac ion
(1− ac ion)∗(close −p ice)
close (5)
whe e
CART
j,adj
ep esen s he adjus ed CAR acco ding o he me hod o W uck (1989) and
He zel and Smi h (1993);
ARj ,adj
ep esen s he adjus ed AR acco ding o he me hod o
W uck (1989) and He zel and Smi h (1993);
ac ion
is he a io o sha es placed o he o al
ou s anding a e he e en ;
close
ep esen s he close p ice one day be o e he e en ; and
p ice is he p ice o PEPs.
3.3. Discoun Calcula ion
The discoun a e was calcula ed based on he me hod ou lined by W uck and Wu
(2009), as ollows:
Discoun =Bench −P ice
Bench =1−P ice
Bench (6)
whe e
Bench
is he benchma k p ice acco ding o W uck and Wu (2009) and
P ice
is he
p ice o he p i a e equi y placemen ansac ion.
3.4. Reg essions and Va iable De ini ions
We de eloped a eg ession model o in es iga e he impac o he indus ial policy
en i onmen on he announcemen e ec , as shown in Equa ion (7), as ollows:
CART
j,i=α+β1Policy +γi∑Con ol Va ialbes +δi∑FixedE ec +εi(7)
Simila ly, we s uc u ed he ollowing eg ession model in Equa ion (8) o he dis-
coun s udy:
Discoun i
j=α+β1Policy +γi∑Con ol Va ialbes +δi∑FixedE ec +εi(8)
In Equa ions (7) and (8), he selec ed dependen a iables a e he sho - e m cumula i e
abno mal e u ns (CAR) o PEPs and he discoun a e (Discoun ), espec i ely. The key
esea ch a iable is Policy, which akes a alue o 1 du ing pe iods o policy igh ening.
The con ol a iables (deno ed as Con ol Va iables) a e hose selec ed o accoun o o he
in luencing ac o s, wi h de ailed de ini ions p o ided in Table 2.Fixed E ec ep esen s
he yea o egional indica o a iables used o cap u e ime- o egion-speci ic a ia ions.
Finally, εi ep esen s he e o e m in he eg ession model.
P e ious esea ch p esen s di e gen iews on he ela ionship be ween discoun a es
and announcemen e ec s in PEPs. Some s udies sugges ha lowe discoun a es e lec
educed agency cos s and imp o ed in o ma ion asymme y (Ma ciukai y e e al. 2005;
Zhang and Li 2008), while o he s ind a posi i e co ela ion be ween discoun a es and
sho - e m s ock p ice mo emen s. This implies ha i ms may o e g ea e discoun s o
a ac ma ke a en ion (Chaplinsky and Haushal e 2005;Lu e al. 2011). Acco ding o
he in o ma ion asymme y hypo hesis, con olling sha eholde s possess an in o ma ion
ad an age o e ex e nal in es o s. Consequen ly, in es o s may in e p e he pa icipa ion
o con olling sha eholde s as a signal o unde alua ion o high p ojec p o i abili y, leading
o lowe discoun demands (Zhang and Li 2008). On he o he hand, Wang e al. (2020)
a gued ha con olling sha eholde s can manipula e issuance p ices h ough ixed p icing
me hods, bu auc ion-based p icing in PEPs mi iga es he isk o such unneling beha io .
Economies 2024,12, 279 15 o 29
Table 5. The adjus ed AARs in he e en window [−10, 10] o di e en policy en i onmen s.
E en Da e −10 −9−8−7−6
All 0.0133 0.0119 0.0138 0.0169 −0.0045
S ingen Pe iod 0.0138 0.0064 0.0049 0.0094 −0.0057
Relaxa ion Pe iod 0.0126 0.0183 0.0242 0.0258 −0.0031
E en Da e −5−4−3−2−1 0
All 0.0077 0.0368 0.0047 0.0111 0.0157 0.0908 ***
S ingen Pe iod 0.002 0.0078 0.0053 0.0133 0.0336 0.0666
Relaxa ion Pe iod 0.0145 0.0709 * 0.004 0.0085 −0.0053 0.1195 ***
E en Da e 1 2 3 4 5
All 0.0474 0.0304 0.0277 0.0307 0.0315
S ingen Pe iod 0.0069 −0.0116 −0.0076 −0.0004 0.0076
Relaxa ion Pe iod 0.0951 ** 0.0801 ** 0.0695 *** 0.0674 ** 0.0596 **
E en Da e 6 7 8 9 10
All 0.0428 0.0257 −0.0127 −0.0089 0.0015
S ingen Pe iod 0.0000 0.0013 0.0035 −0.0050 −0.0091
Relaxa ion Pe iod 0.0932 ** 0.0544 ** −0.032 −0.0135 0.0141
No e: signi icance le els: *** p< 0.01, ** p< 0.05 and * p< 0.1; he adjus ed AAR is calcula ed by he sum o
adjus ed AR di ided by he numbe o e en s.
4.3. The Mul iple Reg ession Analysis on CAR in Announcemen Pe iods
In he model o He zel and Smi h (1993), he CAR o he e en window [
−
5, 0] is
used as he dependen a iable. Howe e , we obse ed ha he a e age AR in ou sample
con inued o exhibi signi ican changes e en a e he announcemen da e, as shown
in Figu e 4and Table 5. The e o e, i is mo e app op ia e o ex end he e en window
o include pos -announcemen da a. A he same ime, selec ing a longe ime window
inc eases he likelihood o in e e ence om o he ma ke e en s. Conside ing hese ac o s,
we chose he CAR wi hin he [
−
3, +3] window as he dependen a iable o ou models,
while using he CAR o he [
−
5, +5] window as he dependen a iable o obus ness
es ing. We conduc ed a eg ession analysis using a ixed-e ec s model and pe o med
obus ness es s by subs i u ing con ol a iables.
Table 6p esen s he eg ession esul s o he announcemen e ec s o PEPs. The
esul s show ha he ela ionship be ween Policy and CAR is opposi e in Panels (a) and (b),
bu nei he esul is s a is ically signi ican . This sugges s ha he policy en i onmen does
no ha e a signi ican impac on he announcemen e ec s o PEPs.
The esul s also e eal a signi ican posi i e ela ionship be ween und aising amoun s
(P oceed) and announcemen e ec s, aligning wi h he indings o Gu and Wu (2014). This
may be because la ge und aising e o s in he eal es a e sec o a ac g ea e ma ke
a en ion, o because PEPs may in ol e asse acquisi ions ha signi ican ly enhance a i m’s
ope a ional capabili ies. In e es ingly, in con as o he indings o o he schola s (Lu and
Chen 2015;Sun 2015), ou eg ession esul s e eal a posi i e ela ionship be ween Le e age
and CAR, which is signi ican in all models excep Model (3). Fu he mo e, changes in
le e age (Chg_Le ) a e also signi ican ly posi i ely co ela ed wi h announcemen e ec s.
These indings sugges ha he ma ke ends o iew mo e agg essi e in es men beha io
by eal es a e i ms a o ably. Fu he analysis in Table 7indica es ha , be o e 2014, he
ma ke esponded mo e posi i ely o le e age-inc easing ac i i ies by eal es a e i ms.
Howe e , a e 2014, he ma ke eac ion o such agg essi e in es men s a egies became
mo e mixed o conse a i e, which is consis en wi h he b oade de elopmen ends in
China’s eal es a e sec o .
Economies 2024,12, 279 16 o 29
Table 6. Reg ession esul s o PEPs’ announcemen e ec s: (a) eg ession esul s o e en windows
[−3, 3] and [−5, 5] and (b) eg ession esul s o obus ness es s.
(a) (b)
(1) (2) (3) (4)
Va iables CAR [−3, 3] CAR [−5, 5] Va iables CAR [−3, 3] CAR [−5, 5]
Cons an 0.562 1.017 Cons an 0.505 1.236
(0.958) (1.544) (0.708) (1.504)
Policy 0.015 0.035 Policy −0.098 −0.098
(0.109) (0.245) (−0.760) (−0.786)
Discoun _p 0.105 * 0.146 * Discoun _b 0.006 0.035
(1.753) (1.950) (0.117) (0.600)
P oceed 0.003 ** 0.006 *** P oceed 0.003 ** 0.006 ***
(2.283) (3.182) (2.326) (3.503)
Top1 −0.001 −0.001 Top3 0.000 −0.001
(−0.989) (−0.673) (0.251) (−0.608)
Tobinq 0.051 0.007 Tobinq1 0.078 ** 0.060
(1.145) (0.137) (2.022) (1.378)
ROE −0.018 −0.026 ROA −0.767 −0.914
(−0.107) (−0.128) (−1.519) (−1.494)
Size 0.002 −0.017 Ln_MV −0.004 −0.030
(0.117) (−0.761) (−0.169) (−1.124)
Le e age 0.374 * 0.477 * Le e age 0.341 0.533 **
(1.813) (1.996) (1.529) (2.028)
Chg_Le 0.384 *** 0.593 *** Chg_Le 0.384 ** 0.657 ***
(2.659) (3.200) (2.501) (3.500)
Bull −0.612 *** −0.461 *** Bull −0.551 *** −0.376 ***
(−6.304) (−4.675) (−5.832) (−3.716)
Boa d −0.178 −0.240 Boa d −0.132 −0.241
(−1.415) (−1.569) (−0.982) (−1.455)
Indboa d 0.540 0.671 Indboa d 0.737 0.795
(0.708) (0.782) (0.892) (0.835)
M ee 0.369 *** 0.535 *** M ee 0.324 *** 0.464 ***
(3.903) (4.351) (2.958) (3.447)
Yea -Fixed Yes Yes Yea −Fixed Yes Yes
A ea-Fixed Yes Yes A ea−Fixed Yes Yes
N 102 102 N 102 102
R2 0.536 0.572 R2 0.506 0.540
Adj R2 0.268 0.324 Adj R2 0.221 0.274
F 20.21 17.61 F 21.89 22.20
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; obus -s a is ics in pa en heses. All models we e
es ed o mul icollinea i y. The VIF alues o all a iables we e below 3, wi h an a e age VIF o less han 2,
indica ing ha mul icollinea i y was no a conce n.
Table 7. Fu he analysis o he impac o le e age and changes in le e age on announcemen e ec s.
Samples N Mean Median Sign Coe icien
Yea < 2014
Le e age 59 0.6727 0.7034 + Insigni ican
Chg_Le 59 −0.0098 −0.0070 + Signi ican
Yea > 2014
Le e age 50 0.6722 0.7090 Mixed Insigni ican
Chg_Le 50 −0.0016 −0.0066 Mixed Insigni ican
The esul s show ha announcemen e ec s a e weake du ing bull ma ke s. Acco d-
ing o he o e -op imism hypo hesis, he ma ke discoun s in es o s’ o e ly op imis ic
expec a ions o i ms, leading o a mo e mu ed ma ke eac ions (Ma ciukai y e e al. 2005).
Mo eo e , we ound ha highe managemen ees (M ee) in Chinese eal es a e i ms we e
associa ed wi h s onge announcemen e ec s. While excessi e manage ial pe ks a e
gene ally seen as being de imen al o i ms’ pe o mance (Edge on 2012;Lu e al. 2008;
Ye mack 2006), some s udies sugges ha managemen ees should no be iewed solely
Economies 2024,12, 279 17 o 29
as ansac ion cos s. Resea ch has shown ha inc eases in bo h o al and pe capi a man-
agemen expenses can signi ican ly enhance o al ac o p oduc i i y in Chinese i ms
(
Yao e al. 2022
). Ou indings sugges ha he ma ke in e p e s highe managemen ees
as an indica ion o p oac i e managemen engagemen , which elici s a posi i e esponse.
We hen conduc ed a g oup eg ession analysis o announcemen e ec s unde di e -
en policy en i onmen s, as shown in Table 8. The VIF alues o all a iables ac oss he
models we e below 2.5, wi h he a e age VIF being less han 2, indica ing no mul icollinea -
i y issues. The esul s e eal a signi ican posi i e ela ionship be ween changes in le e age
and announcemen e ec s du ing bo h igh ening and elaxa ion pe iods. This suppo s he
ull sample indings, as ollows: he ma ke ends o a o agg essi e in es men beha io
by eal es a e i ms, pa icula ly in un a o able policy en i onmen s, whe e such s a egies
a e pe cei ed mo e posi i ely. Consis en wi h he o e all esul s, he ma ke discoun s
o e ly op imis ic sen imen s du ing igh ening pe iods.9
Table 8. Reg ession esul s o announcemen e ec s unde di e en policy en i onmen s.
(1) (2) (3) (4)
Policy Tigh ening Policy Relaxa ion
Va iables CAR [−3, 3] CAR [−5, 5] CAR [−3, 3] CAR [−5, 5]
Cons an 1.016 1.138 0.085 0.891
(1.435) (1.295) (0.119) (1.210)
Discoun _p 0.054 0.080 0.649 *** 0.761 ***
(0.996) (1.266) (5.227) (4.505)
P oceed 0.041 ** 0.030 0.001 0.004 **
(2.137) (1.132) (0.922) (2.146)
Top1 −0.001 −0.002 0.001 0.003 *
(−1.125) (−1.289) (0.834) (1.743)
Tobinq 0.088 0.036 −0.122 ** −0.182 **
(1.313) (0.428) (−2.643) (−2.622)
ROE 0.292 0.258 −0.534 ** −1.100 ***
(1.304) (1.009) (−2.382) (−3.463)
Size −0.033 −0.046 −0.021 −0.052 *
(−1.399) (−1.477) (−0.838) (−1.875)
Le e age 0.282 0.373 −0.026 −0.126
(1.343) (1.423) (−0.117) (−0.431)
Chg_Le 0.489 * 0.693 ** 0.446 ** 0.925 ***
(2.023) (2.261) (2.102) (3.106)
Indboa d −0.417 0.225 2.602 *** 2.999 ***
(−0.420) (0.210) (3.083) (3.639)
Bull −0.884 *** −0.665 ***
(−7.361) (−3.555)
Yea -Fixed Yes Yes Yes Yes
A ea-Fixed Yes Yes Yes Yes
N 50 50 43 43
R2 0.705 0.655 0.774 0.801
Adj R2 0.421 0.323 0.548 0.601
F 16.36 5.867 9.016 15.95
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; obus -s a is ics in pa en heses.
Simila o he indings o Chaplinsky and Haushal e (2005) and Lu e al. (2011),
we obse ed ha he discoun a e has a signi ican posi i e e ec on sho - e m s ock
p ices du ing elaxa ion pe iods. This sugges s ha eal es a e i ms may a ac ma ke
a en ion h ough la ge discoun s o signal unde alua ion o he ma ke (He zel and
Smi h 1993). In e es ingly, du ing policy-loosening pe iods, he ma ke esponds nega i ely
o a iables ela ed o i m quali y and p ospec s. Fo example, bo h Tobinq and ROE
exhibi a nega i e co ela ion wi h CAR, sugges ing ha he ma ke may ques ion he
ma ginal bene i s o PEPs o i m g ow h and quali y du ing hese imes. On he o he
Economies 2024,12, 279 18 o 29
hand, he posi i e impac o he independen di ec o a io on sho - e m pe o mance
highligh s ha co po a e go e nance becomes a mo e p ominen conce n o he ma ke
du ing elaxa ion pe iods. This indica es ha , while he ma ke ocuses on ansac ion-
and company-speci ic cha ac e is ics du ing loosening phases, in es o sen imen akes
p ecedence du ing pe iods o igh ening.
To u he in es iga e, we conduc ed a compa a i e analysis o he indus y policy
en i onmen , as ou lined in Table 9. We applied a ious g ouping s anda ds and u ilized a
pe mu a ion es , which pe o med 500 boo s ap esamples o de i e empi ical p- alues
o e alua ing he signi icance o he indus y policy en i onmen a iable coe icien s. Fo
b e i y, we p esen only he analysis esul s o g oupings based on ROE and discoun a es
in his sec ion.
Table 9. He e ogenei y analysis o PEP announcemen e ec s.
ROE Discoun
(1) (2) (3) (4)
Va iables High Low High Low
Cons an −1.402 1.223 * 0.383 −0.728
(−1.682) (2.014) (0.391) (−1.189)
Policy −0.022 −0.116 −0.121 −0.004
(−0.321) (−1.635) (−1.335) (−0.103)
Discoun _p 0.142 ** 0.157 ***
(2.098) (3.178)
P oceed −0.009 0.000 0.000 0.026 **
(−0.781) (0.081) (0.062) (2.632)
ROE −0.488 0.232
(−0.873) (1.444)
Size 0.052 −0.016 −0.013 0.007
(1.383) (−0.529) (−0.345) (0.350)
Tobinq 0.108 ** 0.010 0.087 0.122 **
(2.135) (0.117) (0.939) (2.492)
Top1 −0.000 −0.003 * −0.002 −0.001
(−0.260) (−1.731) (−0.766) (−1.482)
Le e age 0.750 ** 0.054 0.571 0.405 **
(2.754) (0.193) (1.336) (2.725)
Chg_Le 0.641 * 0.239 0.704 * 0.292 *
(1.810) (1.044) (1.939) (2.034)
Bull −0.181 −0.188 * −0.268 * −0.049
(−1.592) (−1.885) (−1.936) (−0.917)
Boa d −0.214 −0.084 −0.077 −0.018
(−1.163) (−0.360) (−0.279) (−0.177)
Indboa d 2.049 * −1.545 * 0.577 0.885
(1.935) (−1.900) (0.505) (1.132)
M ee −0.911 0.428 *** 0.321 ** 0.340
(−1.431) (3.257) (2.200) (1.688)
A ea-Fixed Yes Yes Yes Yes
N 45 50 48 47
R2 0.543 0.686 0.492 0.521
Adj R2 0.163 0.450 0.0826 0.119
F 2.373 10.27 4.933 2.799
Empi ical
p-Value 0.128 0.094
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; -s a is ics in pa en heses. We ca ego ized he
samples wi h ROE (discoun ) alues g ea e han hei espec i e medians as high ROE (discoun ), while hose
wi h alues below he medians we e classi ied as low ROE (discoun ). The empi ical p- alue, which assesses
he signi icance o di e ences in policy coe icien s be ween g oups, was de i ed h ough 500 i e a ions o
sel -sampling.
Economies 2024,12, 279 19 o 29
In Models (1) and (2), he sample is di ided in o high- and low-ROE g oups. The
esul s indica e ha , al hough he policy en i onmen shows a nega i e co ela ion wi h
announcemen e ec s in bo h g oups, his ela ionship is no s a is ically signi ican . The
empi ical p- alue is 0.128, sugges ing ha he p ope y i m’s ROE does no signi ican ly
al e he impac o policy en i onmen ac o s on announcemen e ec s. In he high-
ROE g oup, sho - e m s ock p ice mo emen s a ound he e en a e in luenced by ac o s
such as he discoun a e, Tobin’s Q, le e age and i s changes, and co po a e go e nance
quali y. Con e sely, in he low-ROE g oup, announcemen e ec s a e d i en by owne ship
concen a ion, ma ke sen imen , and managemen ees, in addi ion o he discoun a e.
Models (3) and (4) classi y he sample based on discoun a e le els. The analysis
e eals ha , al hough he coe icien s o he policy en i onmen a iable a e nega i e in
bo h g oups, hey a e no s a is ically signi ican . Howe e , he empi ical p- alue o 0.09
sugges s ha he impac o he policy en i onmen on announcemen e ec s does a y
signi ican ly ac oss di e en discoun a e le els. Fu he mo e, in he high-discoun - a e
g oup, announcemen e ec s a e signi ican ly in luenced by changes in le e age, ma ke
sen imen , and managemen ees. Meanwhile, in he low-discoun - a e g oup, he key
d i e s a e und aising, Tobin’s Q, and le e age and i s changes.
O e all, while di e ences in he policy en i onmen lead o signi ican a ia ions in
announcemen e ec s unde di e en discoun a es, he e is no subs an ial impac o he
policy en i onmen on sho - e m s ock p ice changes in ei he he ROE o discoun a e
g oups. This inding is consis en wi h ou conclusion om he ull sample analysis.
4.4. Discoun Compa isons ac oss Di e en Policy En i onmen s
Table 10 compa es discoun a es ac oss di e en indus y policy en i onmen s.
As shown in Table 10a, du ing pe iods o policy elaxa ion, he discoun a e o PEPs
eached 16.76%, wi h an al e na i e calcula ion me hod yielding a discoun a e o 25.32%.
In con as , du ing pe iods o policy igh ening, eal es a e i ms did no o e discoun s on
newly issued sha es, esul ing in a p emium a e o 5.83%. E en a e applying imming
echniques, as illus a ed in Table 10b, he esul s emained consis en . Bo h T- es s and
Wilcoxon es s con i med ha he di e ence in discoun a es be ween di e en policy
pe iods was s a is ically signi ican . This inding is inconsis en wi h Hypo hesis H2.
Table 10. Discoun compa isons: (a) discoun compa ison wi hou imming and (b) discoun
compa ison wi h imming a he 5% and 95% pe cen iles.
(a)
Discoun Relaxa ion S ingen DIF T-Tes Wilcoxon Tes
N 61 65 T p-Value Z p-Value
Discoun _b 0.1676 *** −0.0583 0.2260 3.4464 0.0008 3.5319 0.0004
Discoun _p 0.2532 *** −0.0330 0.2862 4.1848 0.0001 4.2885 0.0000
(b)
Discoun _b 0.1544 *** −0.0063 0.1607 3.2985 0.0013 3.5325 0.0004
Discoun _p 0.2487 *** 0.0299 0.2188 4.3421 0.0000 4.2648 0.0000
No e: signi icance le els: *** p< 0.01; DIF e e s o he di e ence be ween discoun s du ing di e en policy
en i onmen s.
4.5. The Mul iple Reg ession Analysis on Discoun
Table 11 p esen s he eg ession esul s on discoun , u ilizing al e na i e con ol
a iables o es he obus ness o he indings. The indings e eal a signi ican nega i e
ela ionship be ween he indus y policy en i onmen a iable (Policy) and he discoun
a e, indica ing ha discoun a es end o be lowe du ing s ingen pe iods and highe
du ing elaxa ion pe iods. This ela ionship emained consis en ac oss a ious obus ness
checks, con i ming he indings in Table 10 and sugges ing ha he policy en i onmen
plays a c ucial ole in p icing nego ia ions.
Economies 2024,12, 279 20 o 29
Table 11. Reg ession esul s o discoun : (a) eg ession esul s o di e en discoun s and (b)
eg ession esul s o obus ness es s.
(1) (2) (5) (6)
Va iables Discoun _p Discoun _b Va iables Discoun _p Discoun _b
Cons an −0.384 −0.475 Cons an −0.498 −0.534
(−0.628) (−0.973) (−0.820) (−1.153)
Policy −0.339 *** −0.182 *** Policy −0.363 *** −0.182 ***
(−3.685) (−2.841) (−4.321) (−2.921)
C l_Sha e −0.132 *** −0.109 ** C l_Sha e −0.135 *** −0.116 **
(−3.289) (−2.327) (−3.687) (−2.571)
Auc ion −0.148 ** −0.128 ** Auc ion −0.112 ** −0.102 *
(−2.496) (−2.347) (−2.051) (−1.781)
P oceed −0.000 −0.004 ** Ln_Sha e 0.099 *** 0.054 *
(−0.002) (−2.057) (3.001) (1.840)
F ac ion 0.361 ** 0.203 Rsize −0.023 −0.026 *
(2.456) (1.631) (−1.444) (−1.930)
Size 0.016 0.022 Ln_M −0.026 −0.003
(0.642) (1.001) (−0.881) (−0.091)
Top1 0.002 0.002 Top3 0.002 0.002
(1.008) (1.196) (1.272) (1.393)
Tobinq 0.106 ** 0.026 Tobinq1 0.169 *** 0.066
(2.138) (0.506) (4.055) (1.341)
Le e age 0.102 −0.153 Le e age 0.171 −0.119
(0.485) (−0.901) (1.011) (−0.709)
ROE 0.228 0.261 ROA −0.511 −0.012
(0.822) (1.167) (−0.936) (−0.024)
Bull 0.068 0.234 *** Bull 0.064 0.233 ***
(0.716) (3.835) (0.698) (3.727)
Balance 0.014 0.013 Balance 0.016 0.014
(1.002) (0.997) (1.309) (1.196)
Yea -Fixed Yes Yes Yea -Fixed Yes Yes
A ea-Fixed Yes Yes A ea-Fixed Yes Yes
N 119 119 N 119 119
R2 0.674 0.652 R2 0.699 0.658
Adj R2 0.500 0.467 Adj R2 0.538 0.476
F 15.26 13.73 F 14.42 13.15
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; obus -s a is ics in pa en heses. All models we e
es ed o mul icollinea i y, and he VIF esul s indica ed no issues. The discoun a es we e winso ized using he
10 h and 90 h pe cen iles o elimina e he in luence o ou lie s. C l_Sha e e e s o he a iable o C l_Sha eholde .
Du ing pe iods o igh ened policy, eal es a e companies o en s uggle o secu e
adi ional bank inancing, p omp ing hem o u n o he secu i ies ma ke o PEPs o
aise unds o supplemen liquidi y. Since PEPs in China equi e app o al om he CSRC
(Song 2014), companies ha comple e PEPs e ec i ely ecei e quali y ce i ica ion om he
au ho i ies. As a esul , du ing pe iods o igh ened policy, only high-quali y companies
can execu e PEPs, mi iga ing he ad e se impac o he policy. Addi ionally, he long- e m
g ow h o China’s eal es a e sec o has s eng hened in es o s’ con idence in high-quali y
i ms’ abili y o imp o e hei pe o mance du ing challenging policy pe iods, leading in-
es o s o accep lowe discoun a es in exchange o p omising in es men oppo uni ies.
The esul s in Table 11 also demons a e ha , when majo sha eholde s pa icipa e in
PEPs, he discoun a e is lowe . This signi ican inding con adic s Zhang e al. (2021),
who a gued ha majo sha eholde s manipula e discoun s o unneling pu poses; ins ead,
i suppo s he ce i ica ion hypo hesis, as in es o s pe cei e he pa icipa ion o majo
sha eholde s as a posi i e signal ha he company is unde alued. The eg ession esul s
also con i m ha , when he auc ion p icing model is employed, he discoun a e is lowe .
Economies 2024,12, 279 21 o 29
This is consis en wi h he a gumen by Wang e al. (2020) ha ixed p icing models a e
mo e p one o manipula ion by majo sha eholde s, whe eas auc ion models educe he
likelihood o unneling beha io , he eby leading o lowe discoun a es.
Table 12 ex ends he analysis o discoun a es ac oss di e en policy en i onmen s.
The esul s indica e ha , du ing pe iods o igh ened policy, he pa icipa ion o con olling
sha eholde s signi ican ly educes he discoun a e, while no such e ec is obse ed
du ing pe iods o policy elaxa ion. This sugges s ha , in un a o able policy en i onmen s,
in es o s place a g ea e emphasis on he accu acy o he signals con eyed (Zhang and
Li 2008). Con olling sha eholde s’ pa icipa ion p o ides ex e nal in es o s wi h a clea
ancho . Consis en wi h he indings o He zel and Smi h (1993), he amoun aised is
nega i ely co ela ed wi h he discoun a e; hey a gued ha he exis ence o economies
o scale leads o a dec ease in he uni cos o in o ma ion p oduc ion as he amoun
aised inc eases. Addi ionally, he posi i e co ela ion be ween he ac ion placed and
he discoun a e aligns wi h he conclusion o He zel and Smi h (1993) ha in es men
oppo uni ies a e mo e di icul o alue han exis ing asse s. A la ge ac ion placed
sugges s a mo e signi ican in es men oppo uni y, which equi es in es o s o commi
mo e esou ces.
Table 12. Reg ession esul s o discoun unde di e en policy en i onmen s.
(1) (2) (3) (4)
Policy S ingen Policy Relaxa ion
Va iables Discoun _p Discoun _b Discoun _p Discoun _b
Cons an −2.737 ** −1.638 * −1.457 ** −1.381 **
(−2.706) (−1.997) (−2.420) (−2.359)
C l_Sha eholde
−0.247 *** −0.216 *** −0.137 ** −0.049
(−2.984) (−3.318) (−2.551) (−0.784)
Auc ion −0.200 −0.116 −0.157 ** −0.074
(−1.329) (−1.343) (−2.448) (−1.064)
P oceed −0.077 *** −0.052 *** 0.006 *** 0.000
(−3.371) (−2.892) (3.085) (0.158)
F ac ion 1.202 *** 1.030 *** 0.057 −0.087
(4.209) (4.573) (0.570) (−0.503)
Size 0.141 *** 0.077 * 0.035 0.041
(3.022) (1.995) (1.358) (1.472)
Top1 −0.003 −0.001 0.004 0.005 **
(−0.929) (−0.473) (1.666) (2.627)
Tobinq 0.066 0.107 0.188 *** 0.093
(0.699) (1.573) (3.988) (1.672)
Le e age −0.328 −0.355 * 0.521 * 0.091
(−1.502) (−1.926) (1.803) (0.297)
ROE 0.735 * 0.744 ** −0.074 −0.152
(1.909) (2.365) (−0.259) (−0.621)
Bull 0.081 0.199 *
(0.562) (2.043)
Balance −0.036 −0.021 0.048 ** 0.059 **
(−1.628) (−1.138) (2.446) (2.566)
Yea -Fixed Yes Yes Yes Yes
A ea-Fixed Yes Yes Yes Yes
N 54 54 50 50
R2 0.771 0.802 0.777 0.749
Adj R2 0.551 0.611 0.580 0.526
F 4.132 8.822 6.681 2.859
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; obus -s a is ics in pa en heses. The discoun a es
we e immed using he 10 h and 90 h pe cen iles. All models passed he mul icollinea i y es .
Economies 2024,12, 279 22 o 29
Du ing pe iods o policy elaxa ion, he p oceeds and he ac ion placed a e no
p ima y ac o s o in es o s in nego ia ions. This di e ence likely s ems om he ac
ha , du ing pe iods o igh ened policy, in es o s a e mo e conce ned wi h he cos o
p ojec s and hei likelihood o success. Mo eo e , he in o ma ion asymme y hypo hesis
sugges s ha smalle companies ypically ace highe le els o in o ma ion asymme y,
which should esul in g ea e discoun s (He zel and Smi h 1993); howe e , ou indings
con adic his iew. Zhang e al. (2021) o e ed an al e na i e explana ion, sugges ing
ha la ge companies a e mo e likely o engage in unneling beha io by con olling
sha eholde s, p omp ing in es o s o demand highe discoun s o compensa e o his
isk. Table 12 indica es ha his phenomenon occu s p ima ily du ing pe iods o igh ened
policy, e lec ing in es o s’ mo e cau ious app oach o PEPs in such en i onmen s. On
he one hand, in es o s acknowledge he posi i e signals om con olling sha eholde s’
pa icipa ion, while, on he o he hand, hey emain wa y o po en ial unneling beha io .
The esul s also e eal ha , du ing pe iods o policy igh ening, ROE is posi i ely
co ela ed wi h he discoun a e. This sugges s ha in es o s be on he possibili y ha
PEP- ela ed p ojec s could u n a ound he company pe o mance du ing di icul imes,
a he han elying on he company’s inhe en p o i abili y. Finally, owne ship balance only
signi ican ly a ec s he discoun a e du ing pe iods o elaxed policy. Al hough a highe
owne ship balance implies g ea e cons ain s on con olling sha eholde s, in es o s may
be conce ned ha a educ ion in he con olling sha eholde s’ in luence could lead o missed
in es men oppo uni ies due o ine icien decision making in a o able ma ke condi ions;
as a esul , hey may demand a highe discoun o compensa e o his unce ain y.
Table 13 p esen s a compa a i e analysis o he a iable Policy based on he wo ol-
lowing c i e ia: majo sha eholde pa icipa ion in PEP ansac ions and he p icing model
used. Models (1) and (2) indica e ha , when majo sha eholde s pa icipa e in he PEP
ansac ion, he discoun a e signi ican ly dec eases du ing pe iods o igh ened indus y
policy. This suppo s he ce i ica ion ole o majo sha eholde s, pa icula ly in ad e se
policy en i onmen s, whe e bo h he CSRC and he majo sha eholde s p o ide a dual ce i-
ica ion o he company’s quali y. This inding is consis en wi h he ce i ica ion hypo hesis
(He zel and Smi h 1993). Howe e , he empi ical p- alue o his g oup is 0.208, sugges ing
ha he di e ence in he policy en i onmen ’s impac is no s a is ically signi ican be ween
he samples wi h o wi hou majo sha eholde pa icipa ion. In Models (3) and (4), a sig-
ni ican nega i e co ela ion is obse ed be ween he policy en i onmen and he discoun
a e, ega dless o whe he he p icing model is an auc ion o a ixed-p ice mechanism.
Howe e , he empi ical p- alue is 0.366, sugges ing ha he impac o he indus y policy
en i onmen on he discoun a e does no di e signi ican ly be ween he wo p icing
models. This sugges s ha in es o s ea he policy en i onmen as an independen ac o
du ing nego ia ions, ega dless o sha eholde pa icipa ion o p icing mechanisms.
E alua ing he long- e m pe o mance o PEPs is challenging due o he luc ua ions
in policy en i onmen s o e ime, which could a ec he eliabili y o such s udies. Thus,
his pape does no del e deeply in o he e ec on he long- e m pe o mance o PEPs.
Ne e heless, long- e m buy-and-hold abno mal e u ns (BHARs) a e calcula ed o u he
explo e in es o s’ mo i a ions o pa icipa ing in hese ansac ions.
10
P e ious esea ch
shows ha companies wi h CSRC-app o ed PEPs end o demons a e a be e long- e m
pe o mance and ROE, especially when majo sha eholde s a e in ol ed (Dong e al. 2020).
Table 14 displays he long- e m BHARs o 250, 500, and 750 ading days pos -
ansac ion. To minimize he in luence o he announcemen pe iod, he uppe limi o he
ime window was se a 50 days a e he e en . The lowe limi s we e se a one, wo, and
h ee yea s pos -e en , gi en ha he a e age numbe o annual ading days in China
is app oxima ely 250. The esul s indica e a posi i e long- e m pe o mance o PEPs in
Chinese eal es a e companies—a inding ha con as s wi h he esul s o se e al s udies
(He zel e al. 2002;K ishnamu hy e al. 2005;W uck and Wu 2009;Yu e al. 2016), bu
is consis en wi h he esul s o Louisiana e al. (2007) and Zhou (2016). In he Chinese
ma ke , his ypically akes a ound a yea o implemen , and newly subsc ibed sha es
Economies 2024,12, 279 23 o 29
usually ha e a one-yea lock-up pe iod. Unde hese condi ions, in es o s a e willing o
accep smalle discoun s in exchange o aluable in es men oppo uni ies, esul ing in
a signi ican abno mal e u n o 15.42% a e wo yea s. This inding challenges o e ly
op imis ic assump ions and explains why in es o s may accep lowe discoun s o e en
pay p emiums o secu e aluable oppo uni ies, e en in un a o able policy en i onmen s.
Table 13. Analysis o discoun a e he e ogenei y in PEP ansac ions.
Con olling Sha eholde s P icing Mode
(1) (2) (3) (4)
Va iables Pa icipa ion Non-Pa icipa ion Auc ion Fixed
Cons an −0.322 −0.797 −1.921 * 1.749 *
(−0.342) (−0.809) (−1.909) (2.024)
Policy −0.268 *** −0.181 *** −0.265 *** −0.311 ***
(−3.392) (−2.805) (−4.058) (−3.276)
C l_Sha eholde
−0.162 ** −0.077
(−2.601) (−0.847)
Auc ion −0.200 *** −0.175
(−2.813) (−1.491)
P oceed −0.002 −0.009 −0.019 −0.000
(−0.681) (−0.309) (−0.891) (−0.128)
F ac ion 0.281 0.277 0.858 *** −0.060
(1.278) (0.914) (2.804) (−0.516)
Size 0.029 0.003 0.057 −0.026
(0.798) (0.072) (1.381) (−0.929)
Top1 −0.002 0.003 −0.000 −0.006
(−0.600) (1.496) (−0.067) (−1.203)
Tobinq 0.118 0.213 *** 0.267 *** 0.052
(1.131) (3.270) (2.938) (0.616)
Le e age 0.120 0.725 ** 0.546 * −0.204
(0.375) (2.534) (1.921) (−0.645)
ROE −0.215 −0.097 0.671 −0.255
(−0.698) (−0.242) (1.607) (−1.037)
Bull −0.135 −0.054 −0.087 −0.243
(−1.011) (−0.543) (−0.817) (−1.404)
Balance −0.034 0.060 *** 0.017 −0.057
(−1.175) (3.010) (0.802) (−1.361)
A ea-Fixed Yes Yes Yes Yes
N 64 48 71 38
R2 0.460 0.769 0.590 0.614
Adj R2 0.208 0.566 0.389 0.287
F 4.361 13.93 5.632 4.679
Empi ical
p-Value 0.208 0.366
No e: signi icance le els: *** p< 0.01, ** p< 0.05, and * p< 0.1; obus -s a is ics in pa en heses. The empi ical
p- alue, which assesses he signi icance o di e ences in Policy coe icien s be ween g oups, was de i ed h ough
500 i e a ions o sel -sampling.
Table 14. The BHARs o long- e m pe o mance.
E en Windows N Mean T-Value p-Value
[50, 250] 96 0.0691 1.3588 0.1774
[50, 500] 95 0.1542 ** 2.0490 0.0432
[50, 700] 94 0.0314 0.3595 0.7200
No e: The calcula ion o BHARs is shown in Appendix B; ** indica es a s a is ical signi icance le el o 5% le el o
signi icance.
Economies 2024,12, 279 24 o 29
5. Conclusions
This s udy examined p i a e equi y placemen ansac ions in Chinese eal es a e
companies om 2006 o 2023, e ealing se e al key insigh s. While con i ming he posi i e
announcemen e ec s epo ed in he exis ing li e a u e, ou indings e eal ha ma ke
eac ions a e less p onounced du ing pe iods o s ingen indus y policies when compa ed
o mo e elaxed policy en i onmen s. The posi i e announcemen e ec s obse ed ac oss
he ull sample sugges ha he ma ke in e p e s PEPs as an indica ion o inc eased
egula o y o e sigh , educed agency cos s, lowe capi al cos s, o alle ia ed in o ma ion
asymme y in eal es a e companies. Howe e , he eg ession esul s indica e ha he
policy en i onmen is no a decisi e ac o in de e mining PEPs’ announcemen e ec s in
he Chinese eal es a e sec o .
Ins ead, o he a iables eme ged as signi ican d i e s o announcemen e ec s. Du -
ing bull ma ke s, ma ke sen imen has a signi ican nega i e impac , indica ing ha
in es o i a ionali y leads o discoun ed alua ions o PEP ansac ions. Addi ionally,
announcemen e ec s a e signi ican ly posi i ely ela ed o he amoun aised, changes in
le e age, and managemen ees. No ably, he ma ke esponded a o ably o inc eases in
le e age be o e 2014, bu became mo e conse a i e pos -2014. This shi e lec s b oade
ends in he eal es a e sec o and changes in in es o beha io . In e es ingly, highe
managemen ees a e in e p e ed by he ma ke as a sign o p oac i e business ac i i ies,
encou aging i ms o seize de elopmen oppo uni ies, especially du ing boom phases in
he sec o .
Ou analysis also showed ha , du ing pe iods o policy elaxa ion, he ma ke ocuses
on ansac ion and company cha ac e is ics, while in es o sen imen becomes a key ocus
du ing igh ening pe iods. He e ogenei y analysis u he e ealed ha , al hough he
policy en i onmen a ec s announcemen e ec s di e en ly ac oss a ious discoun a e
le els, i does no signi ican ly impac hese e ec s ac oss di e en discoun a e o ROE
g oupings, consis en wi h ou p e ious indings.
We also ound ha he indus y policy en i onmen plays a signi ican ole in in es o s’
ba gaining powe . Con a y o ou expec a ions, discoun s on PEPs a e smalle du ing
policy- igh ening pe iods. This can be a ibu ed o he ac ha success ul PEPs equi e
app o al om he CSRC, which ac s as a quali y ce i ica ion, especially when majo
sha eholde s a e in ol ed. Addi ionally, long- e m pe o mance da a show posi i e e u ns
o PEPs in he Chinese eal es a e sec o , sugges ing ha in es o s a e willing o accep
smalle discoun s in exchange o po en ially subs an ial u u e gains. This suppo s he
ce i ica ion hypo hesis (He zel and Smi h 1993) while con adic ing o e ly op imis ic
hypo heses (He zel e al. 2002;Ma ciukai y e e al. 2005).
Ou indings e eal ha majo sha eholde pa icipa ion and auc ion p icing models
signi ican ly educe discoun a es, highligh ing he impo ance o sha eholde endo se-
men and he mi iga ion o unneling isks. Du ing pe iods o policy igh ening, in es o s
end o in e p e majo sha eholde s’ in ol emen as a signal o po en ial unde alua ion,
while emaining cau ious abou he possibili y o unneling. The ela ionship be ween
p oceeds, ac ions placed, and discoun s du ing igh ening pe iods suppo s he ce i ica-
ion (in o ma ion p oduc ion) hypo hesis. No ably, in un a o able policy en i onmen s,
in es o s ocus mo e on he po en ial o PEPs o imp o e company pe o mance, while,
unde a o able policy condi ions, hey exp ess conce ns abou missed oppo uni ies due
o ine iciencies in decision making. Finally, a he e ogenei y analysis o discoun a es
showed ha in es o s ea indus y policy as an independen ac o in PEP nego ia ions.
O e all, he e idence s ongly suppo s he ce i ica ion hypo hesis, while also indica ing
ha PEP dynamics a e in luenced by he e ol ing cha ac e is ics o he indus y and i s
a ious s ages o de elopmen .
This s udy o e s se e al implica ions o eal es a e companies, in es o s, and pol-
icymake s. Real es a e i ms should pay close a en ion o he subs an ial impac o he
indus y policy en i onmen on PEP ba gaining and unde s and how di e en policy
p e e ences challenge hei ope a ional capabili ies. Companies can bene i om le e aging
