Study On Refinancing Behaviors And Decision Mechanism Of Listed Companies In China

This article, based on thorough review of domestic and foreign financing decisions, takes financing behaviors and decision mechanism as its visual angle to conduct an overall and intensive study on refinancing decisions of the listed companies. It begins by an empirical analysis on the pattern of the refinancing market for the listed companies in China and their choices of financing behaviors, and then performs a systematic analysis on the characteristics of different financing approaches and instruments. Backed by the aforementioned analyses, this article opens out the black box for refinancing decision of the listed companies, and builds up the framework for systematic analysis on refinancing decision of the listed companies as well, thus carrying out an overall analysis on decision-making body, decision-making objective, decision-making process and key links, influencing factors and the mechanism in which the interested parties play their parts.This study discovers that the financial repression, arising from excessive government interference, distorts the price signal of capital market. The financial costs of capital is thus not the governing factor for refinancing decision of the listed companies in China, and the refinancing decision acts in accordance with the discretion decision model, in other words, depends on the speed of being fully funded and the administrative cost of the management. As a result, the operational performance of the listed companies after refinancing generally turns downward, which indicates the capital market could not allocate resources efficiently. This article, from both microcosmic and macrocosmic visual angles, conducts analyses of this problem. From microcosmic visual angle, as big troubles exist in both two categories of agency fought for between big shareholders and medium and small shareholders and between the management and shareholders, the huge agency costs, resulted from key shareholder control and insider control, forces the refinancing decision to run counter to the theoretical goal of maximizing corporate value. Therefore, the theories of corporate financing that are applicable in the developed market could not be used to make a convincing explanation on the decision behaviors for financing of the listed companies in China, which drives the author toward the macrocosmic visual angle to seek for the answer from the theories of transition economy and financial development.By 2005, the monetization level (ratio of M2 to GDP) of China was as high as 164%, and the f'mancial interconnection ratio (FIR) approached to that of the developed countries as well. Despite all this, in that year, the assets held by the banking system accounted for dominant proportion of the total financial assets, and the balance of household savings deposits in china totaled 14,000 billion yuan and the deposit and loan balance kept expanding to over 9,000 billion yuan. For the lack of an effective mechanism of transfer savings into investment, China capital market still saw serious shortage in provision of long-term capital. Domestic enterprises and investors have only a few channels chosen for their investment and financing, and could not enjoy full power of decision. The financial market is in serious division, the financial products are less in both category and quantity, the interest rate is still controlled by the government, and the resources of capital market are oriented to the sectors favored by the government, which all indicate that financial repression is prevalent in our country. Financial repression breaks down the market mechanism and pricing structure used to allocate financial resources, thus keeping the capital market under a long-term repression state to be unable to give full play to its function of effective allocation of resources.In conclusion, this article holds that upon completion of the equity division reform, the binary feature of non-circulating shares and circulating shares will disappear in China stock market, and the conflicts in principal interests will be therefore settled between the two categories of shareholders, thus changing greatly both systematic background and market anticipation for refinancing of the listed companies in China. In a bid to improve the efficiency of refinancing decision to be made by the listed companies, the author, from both visual angles of perfecting corporate governance and impelling deepening of finance, brings forward such political proposals as vigorous implementation of the management share ownership policy, rundown of agency costs, gradual reduction of government control, promotion of financial innovation, and giving full play to the function and efficiency of the capital market to allocate resources, so as to integrate gradually China capital market with the developed and mature capital markets. Upon overall circulation, important changes will take place in the pattern of China refinancing market, in the characteristics of refinancing behaviors of the listed companies, and in the financing decision mechanism. In addition, the corporate bonds market will be booming and further developed, and the control power, corporate valuation and offering opportunity will become the key factor for the listed companies to make refinancing decision.