Notice of RetractionGrowth Opportunities and Accounting Based Regulations (Evidence from Chinese SEOs Market)

Notice of Retraction

After careful and considered review of the content of this paper by a duly constituted expert committee, this paper has been found to be in violation of IEEE´s Publication Principles.

We hereby retract the content of this paper. Reasonable effort should be made to remove all past references to this paper.

The presenting author of this paper has the option to appeal this decision by contacting TPII@ieee.org.

Market reaction to the issue decision depends on firm´s ability to signal private information about the availability of profitable investment projects. The information could not be signaled properly due to information asymmetry between the managers and outside investors hence cause a significant price drop on announcement of SEOs. In China different accounting based regulations on listed companies have been imposed from time to time in order to limit the supply of shares to reduce adverse selection in the SEO. This study tries to find the impact of these regulations in reducing the information asymmetry between the managers and investors and the impact of these regulations on announcement effects of SEOs by growth firms. The results show that regulations are succeeded in reducing the information asymmetry hence resulting in less negative announcement effects for growth firms in regulatory era. We find that larger the issue size and firm size, positive news about the value of firm in regulatory era hence contradicting the information asymmetry hypothesis.