Mode Of Financing Of Listed Companies In China And The Financing Order Empirical Research

The Capital Structure of enterprises is an important part of the organizational theory of modern enterprises. With different financing modes,there will be different capital structures. When given a gross financing amount,how a firm choose a reasonable capital structure or financing mode such as bond,stock and bank loan under a rational pecking order according to it's target function,cost and income is a hot topic that is focused on by both financial theory and practice. This paper makes an statistical analysis on the rate of every financing amount to overall capital source of Chinese listed companies from year 1993 to 2000 and draws the characteristic of the financing order of Chinese listed companies:The financing order is stock financing -bank loan - internal financing - bond financing from 1993 to 1997 soon after stock market was set up in China;Affected by various kinds of economic policies and other factors,the financing order is bank loan - stock financing - internal financing - bond financing after 1998.The conclusion is reverse to the "Pecking Order Theory" and that of the companies in developed countries,namely ignoring internal financing and having a partiality for stock financing,extremely with the disgust to debt financing. Why did this happen? This paper analyzes the irrationality and provides several explanations on the causes of the reverse financing order. In order to further prove the irrationality,this paper also makes an empirical test on the impact of the reverse financing order on the companies' performance and proves internal financing presents a positive relation with Companies' performance;Stock financing and debt financing presents a negative relation with companies' performance. As a result,we find the reverse financing order leads to a decline of companies' performance. Aiming at improving Chinese listed companies' financing order,we offer some solutions from the angles of both government polices and the listed companies themselves in the end of this paper.