Market Timing with Security Offering Regulations: Evidence from Private Placements of Chinese Listed Firms

In the context of China's strict security-offering regulations, we examine market timing by linking firms' decisions to withdraw private placement (PP) proposals to changes in market condition during the approval process. We reveal that timing based on the strictness of the security-offering regulations is as important a dimension of market timing as timing based on the issuers' market valuations is. A firm's probability of withdrawing its PP proposal is negatively related to changes in its market-to-book ratio and changes in the strictness of regulations, measured by changes in the issue market (hot/cold) occurring between proposal announcement and outcome day. PPs for investment financing have more pronounced timing effects than PPs for asset restructuring.