Choice Of Corporate Financing

With the transformation from planned economy to market economy in China, the investment and financing system has undergone a great change. With the development of financing market, direct financing has appeared from nowhere in China in 1990s and developed stably. The government oriented indirect financing has caused the enterprise to depend too much on the banking industry and the concentration of risks on the banking has become the barrier to further reform. It proves rational to actively promote the capital market in order to alleviate the government's risks and advance the state owned enterprise reform. As the important method of enterprise financing, direct financing has been faced with an unprecedented opportunity, yet the market operation, government supervision, and laws and regulations need adjustment and betterment. Especially a lot of listed companies, though a fortune in hand, make every possible effort to IPO. There lives a heated discussion over the uncertainty and inefficiency of financed capital, and the lowering of investment returns. Most views believe that we should develop direct financing, focusing on the stock market. That is one of reasons the author choose this topic on enterprise bond. What is more, the listed company, having changed a lot after IPO in its balance sheet, should differ from the other forms of enterprises in choosing the refinancing method. Yet the domestic essays concentrate on the attacks to the new stock offer, and seldom present the refinancing methods, and that motives the author to make the analysis and presentation.Starting from the classic theories on capital structure, this paper analyses the financing structure and forms in Chinese enterprises compared with the foreign counterparts. Pinpointing the rational analysis and comparison of the financing method conducted by listed companies,the paper presents that China should develop the enterprise bond market, including the convertible bond, so as to widen the financing channel, adjust the capital structure and promote its economic returns.On the basis of classic theories, this paper emphasizes the combination of theory and practice in the research into the objectives with enough facts and data by the means of generalization, comparison and listing. After clarifying the three crossed and combined concepts: financing structure, financing forms and financing means, the paper briefs on the development of enterprise capital structure and analyzes the ideas brought about by these theories. Then systematically presents the history and status quo of the Chinese enterprise financing system, and the measures required to reform. Finally it compares in detail the refinancing means of the listed companies from the point of theory and domestic practice, points out issue of listed companies' over-reliance on equity refinancing, and suggests more attention should be paid to enterprise bond and banking loans.Chapter 1 gives the definition, characteristic and the content of the enterprise financing structure, financing approach and financing form, briefs on the classic capital structure theory, and reveals the reality from its analysis. An enterprise, especially in China, cannot maintain its development solely relying on internal financing. The role of outsourcing structure should be played. Because of the limited scale of indirect financing, equity financing and enterprise bond financing have risen to fame. The western scholars have explored a lot into the financing structure theory since 1950s. This paper selects and analyses such representative theories as the M-M model, modified M-M model, imbalance information theory, incentive theory and control theory, and deduces the direction and guidance to Chinese enterprises. That is, an enterprise is expected to abide by the financing rules from internal financing to debt financing and to equity financing, and pay attention tothe special circumstances of domestic transformation to balance the ratio of debt financing and equity financing. Chapter 2 traces th...