Abstract
This paper investigated how and why abnormal stock returns associate with the announcement of equity issues by Chinese firms. We estimated abnormal return by OLS, using the market model. Then we chose some variables and established an econometric model to verify some hypothesis introduced in previous study. The empirical results indicate that there exist negative abnormal return on China stock market and the average abnormal return on announcement day is -0.017. Regression analysis show that the price pressure hypothesis and the wealth transfer hypothesis can well explain the negative abnormal return on China stock market which is also associated with the company's investment opportunities.
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