Equity Split With A Listed Company Equity Financing Behavior

This paper focuses on equity financing by listed companies in China. It is the main contents that there is special situation of separated equities in stock market and stocks are classed as circulating Equities and Non-circulating Equities. Circulating Equity stockholders concern of the market value of company, while Non-circulating Equity stockholders concern of the net assets per capital and benefits from control rights. There are conflicts between the two types of stockholders. Non-circulating Equity stockholders hold controlling rights of company, and financing strategy represents benefits of Non-circulating Equity stockholders. However in terms of pursuing more assets per capital and control rights advantages, stockholders who hold the controlling shares prefer to issue equities without consideration on whether project results in good returns. This kind of issue is over-financing. Over- financing leads to the decreasing of company finance quality and losses of investors. For Non-circulating Equity stockholders pay little attention to stock price, the supervision from outside investors is inefficient. For Non-circulating Equity can not be traded in public market, it is impossible for outside stockholders to take over the corporate controlling right. To protect advantages of investors, SEC formulates a series of policies to restrict corporation issue equities. It is possible that company with good returns project loses issueing qualification, or the company without good returns project gets the listing qualification, since restricted policy does not aim at respective project. Rigid restricted policy may efficiently constrict over-financing, however it can prompt companies publicizing inveracious information.This paper goes as follows: The chapter one is introduction, mainly introducing the context, meaning, structure, innovation and shortage of this paper.Chapter two reviews some classical papers about the theory of agent cost and ranges benefits conflicts, which between circulating Equity stockholders and Non-circulating Equity stockholders from separated stocks, to it. At the same time the paper has reviewed some researches related to Chinese detailed circumstance.Chapter three points capital structure theory can not explain equity financing by Chinese listed companies in the way of reviewing data. There is no tradeoff among the different financing ways. Companies finance quality constantly declines with the...