Stock price reaction to announcement of equity financing by companies listed on the Shanghai stock exchange

Abstract

Investors nowadays are doing investment in the stock market, the announcement of new equity issue would also a part of the strategy for them to gain more returns. This paper will mainly test empirically on the market model to see if the equity financing announcement would affect the stock price. And it examines the stock prices in the Shanghai stock exchange response to the announcement of equity issues. Some findings are relative to other many theoretical rationales. First, stock price roughly has a positive reaction to the announcement of the new equity issuance, and the reaction is different from some previous research. Second, for the different time intervals within one day, the average return also would be different. As for the importance of this research, it would show whether investors would gain through the announcement of new equity financing.