An Analysis Of Equity Financing Preference Of China's Listed Company From Control Cost-benefit

The development of Chinese capital market with the great fiancing demand has most directly embodied its powerful financing function and reflected the financial system changes. At the same time the listed companies' equity financing preference has attracted much attention. Many scholars have come to a conclusion that this phenomenon is contradicting to the classical pecking order theory and studied on the reseons of the preference and the methods resolving this problem.This dissertation posing two questions after hackling the classical fiancing theories: one is that what is the value foundation of the classical fiancing theories? The other is how about their applicability? The second one is that can the equity finacing preference of Chinese listed companies against the pecking order theory mean the fiancing behavior irrational. The enterprise value maximization, namely capital cost minimization is the classical financing theories' value foundation. And not all the ampirical tests support the pecking order theory. Therefore it's a wrong starting point using the inconsistency to deny the Chinese listed companies behaviour. Enterpise form has evoluted with the financing, especially external fiancing behavioue. As the major form of morden company system enterprises, stock company is the result of external fiancing. So in order to know the enterprise's finacing target, we have to find the anwer from the evolution and the essence of them. The financing tartet has directly associated with the financial target in the financing theories which begin with MM theorem. That is when the capital cost is minimum the enterprise value can realize maximization. But in reality as a legal person will the enterprise follow the phypothessis of normative research? The Chinese enterprises, especially the listed companies are products of institutional change, not natural evolution, inevitably with blots of old system and institutional change. Therefore it is suspectable to study the the listed companies' fiancing preference, not considering the past. Because the preference is initiated from economic man's intention to pursue more benefits, this dissertation in the economic framework of cost-benefit of control studies the financing preference of Chinese listed companies and focuses on the different characteristics in different pieods,market performance,effects. Based on the theoretical and empirical studies this dissertation has stated countmeasure suggestions to solve the financing preference problem.The major part of dissertation can be divided into five chapters.Chapter 1 is the introduction. In this part questions have been posted after hackling the literatures. And then we put forward this dissertation's research thinking and methods and summarize the related concepts,structure,research conclusion and innavation.Chapter 2 is the theretical foundation of this dissertation. Based on the redefination of control cost and control benefit, this dissertation has studied on the equity financing preferrence of the Chinese listed company. First we review of the related literature about control benefit. Just because of controversial points of its connotation, it's necessary to redefinate the defination of control benefit. Then we re-recognize control cost. Obtaining,maintaining and executing the right of control all need cost. After the analysis on the beforehand cost and the afterwards cost, we compare the differences between control cost and capital cost which is the standard to determine the financing choice in the classical thories. Finanlly the defination of control benefit has been redifined. From the point of control cost, control benefit is reasonable. However according to the two different kinds of effects generated by the using of control right, control benefit can be devided two parts: common-control benefit corresponding to cooperative effect and self-control benefit corresponding to tunneling effect.Chapter 3 is the theoretical analysis on the equity financing preferrence of Chinese listed companies. In first part we disscusse the value orientation of Chinese listed companies' financing: maximum of control benefits which is concluded from the views of the financing transition path,the external behaviour of making use of the listed company to obtain huge amount of capital. This value orientation can be explained by the principal-agent theory. In the second part we study the financing preference of Chinese enterprise under the control cost. Due to soft constraint the equity finacing preference choice of Chinese listed company is rational. In the third part we discuss in the peoried of non-tradable shares what the constraint conditions of the equity financing preference are by establishing mathematical model. We can limit and guide this preference through changing these constrain conditions.Chapter 4 is the empirical analysis on the equity financing preferrence of Chinese listed companies. In this part we have a study on the fiancing preference after shareholder structure reform. The simple and pround reasons are discussed on a new phenomenon of directional add-issuance. Then we use the Probit Binary Choice Model to analyze the probability of the influence of nine characteristic variables on the financing preference of the listed companies. The results are consistent to the statistical analysis results. Higher the cash flow right is, non-state holding listed company is inclined to choice equity financing. The non-statle holding listed company, especially more private enterprise has smaller scale after EPO,higher controlling shareholding and presents SEO quickly after IPO to expand rapidly and to strengthen ability of anti-risk. Considering the real financing condition, it maybe more due to the policy inclination. But to a certain extent shareholder structure reform has cut one way of obtaining the private control benefit that is no cost to some extent. So we can say that the reform has restrained the listed company's goal of "money-looping" and guide its financing behaviour. On the other hand the pypothethsis that more the separation degree of control right and stock control right, the state listed company is more inclined to choice equity financing doesn't pass the significance test. One fact that the listed companies with SEO are much more than the non-SEOs maybe produce this result. The other reason may be that the researching period is too short for just two years after the shareholder structure reform. So we should go on collecting materials and come to more reliable results. Last we forecast the financing preference of the Chinese listed company in the period of Full Circulation. The goal of maximum of control benefit will not change. The fluctuation of stock's market price will cause the controlling shareholder's benefit. Manipulation of stock price to obtain the benefit control will be the newly added goal that will have an effect on the listed company's financing choice.Chapter 5 analyzes the positive and negative effects of Chinese listed company's equity financing preference and puts forward suggestions on restricting this preference according to the harm it has produced. This financing preference has a positive effect on the macro-economy and the companies' self-development. But it also has a negative effect on company behaviour and the function of capital market. We propose the suggestions to build and strengthen the internal and external restraint-incentive mechanisms, especially restraint mechanisim. Such as optimizing ownership structure,reforming personnel appointment system and rational defining common benefit of control form the effective internal restraint-incentive mechanism. Reforming stock issuing system,cultivating cost of capital consciousness,strenghening information disclosure,reputation,delisting,legal and supervision system will increase control shareholders' cost of opportunitism and build external restraint mechanism. In addition bond market is necessary to build for perfecing capital market structure,balancing stock market risk and increasing ways to finance and invest for the enterprise and investor.The combination of macroscopic and microscopic research,nomotive and empirical analysis,historical and logic study are employed in this dissertation. The creative points include the study of fundamental motivation of Chinese listed company,redefinition of control benefit,empirical test of influence factors after the shareholder structure reform. The evolution of enterprise form is not a natural process but a product of institutional change in China. We come to the conclusion that Chinese listed company pursues the maximum of control benefit not of enterprise value. Based on the redefination of control benefit we not only analysize the restraint conditions of equity preference on control cost frame but also study the influence factors after the shareholder structure reform by an empirical test. At last we put forward corresponding suggestions according to the analysis on the positive and negtive effection of financing preferrence.