Growth Opportunities and Institutional Investors Behavior—An Analysis based on Private Placement Discount

Institutional investors can prevent tunneling by controlling shareholders during private placement, while corporate growth opportunities have an important effect on institutional investors' decisions. The relationship between institutional investors and private placement discount rate was empirically analyzed using large sample data during 2006—2015. The institutional investors were classified into six categories（broker, trust, insurance, fund, investment company and others）. The empirical results indicate that: （1）discount rate was reduced by institutional investors' subscription when the listed company was facing high growth opportunities. In addition, the more they bought, the more discount rate was reduced；（2）The participation of broker, assets management company, trust and fund reduced discount rate when the company was facing high growth opportunities. On the other hand, when the company was in low growth opportunities, the results turned out that discount rate only decreased as a result of the participation of investment companies, while all the other institutional investors had no significant impact on discount rate. Therefore, it is necessary to distinguish the heterogeneity of institutional investors when formulating policies. Independent institutional investors can be appropriately introduced into private placement to maintain the rationality of private placement price.