The subscription behaviors of large shareholders, abuse of signal effect and directional add-issuance of listed companies in China

This paper finds that the single maximum daily AAR and CAR are greater during the directional add-issuance declaration which large shareholders subscribe or replace new shares with their assets than not by event study. So the signal effect of behavior of large shareholders in the directional add-issuance exists in the listed companies in China. But the factor analysis shows that the directional add-issuance that the large shareholders participate cannot bring long-term performance to improve or enhance, and the cumulative score is negative and declining. Moreover, the large shareholders participate in the directional add-issuance though they that the performance of the company is a substantial decline before directional add-issuance. In this paper, the subscription or replacement of large shareholders is intended to changing market expectations and valuation, and attract external market and small-medium investors to subscribe which is the abuse of the signal effect of the directional add-issuance.