Capital Market Mispricing And Corporate Financial Policy

The theory that capital market is inefficient is getting more and more research support.The significance of this theory to corporate finance lies in that the mispricing of capital markets can have a significant impact on the company's financial decisions.This paper using capital market pricing bias as the main line explore the influence of capital market mispricing on the company's financial policy and its economic consequences.Based on this main line,this paper makes an in-depth discussion on the four issues of mispricing and corporate finance decision-making,mispricing and dynamic adjustment of capital structure,reverse market timing behavior of large shareholders,mispricing and the company's stock dividend policy.The main points and findings are as follows:As the introduction of the paper,Charpter 1 introduces the research background and significance and elaborates the specific research content and academic contribution and innovation.The second chapter summarizes the existing research from the perspective of the impact of capital market mispricing on the financial policy of the company,which could lay a good foundation to better explore the shortcomings of the existing research,the potential contribution of this paper and the direction.of future research.Chapter 3 aims to study the impact of capital market mispricing on corporate finance decisions.This chapter argues that in the emerging capital markets such as China,the company's refinancing target may be either an external financial investor or a controlling shareholder or major shareholder of a listed company,and the company's share price is down or upward are likely to have an impact on the company's financing decisions.The study found that: First,the companies whose stock are overvalued carry out more equity financing,this;Second,the time when the stock price is undervalued will also become a listed company equity financing opportunity window.This may be related to that the target of financing is major shareholders.Thirdly,companies whose property nature is state-owned,larger companies,and weak financing constraints are more likely to use the opportunity of equity overvaluation in capital markets for equity financing.Fourth,for debt financing,regardless of the level of financial constraints facing the company,have shown that the stock was underestimated the more serious,the more inclined to use the debt to finance.In the fourth chapter,the overvaluation or undervaluation of stock price is regarded as an influencing factor to affect the cost of equity financing.Under the framework of dynamic adjustment of capital structure,we examine the impact of capital market mispricing on financing decision and dynamic adjustment of capital structure.Through the study we found that the first,overvalued and over-indebted companies will use the timing of stock price overvalued to carry out equity financing,so that the speed to complete the capital structure adjustment is quicker.Second,thespeed of the undervalued and under-indebted companies whose stock price is overvalued to the target capital structure adjustment is relatively slow,indicating that the overvalued stock price promote equity financing rather than debt financing;Third,The speed of the company that are undervalued and over-indebted to the target capital structure adjustment speed is relatively fast,which are inconsistent with the United States and other mature capital market research findings,indicating that the time when the stock price is undervalued for the listed companies to carry out equity financing to implement the capital structure adjustment provides the opportunity window;Fourth,the speed of the company whose stock price is undervalued and who is under-indebted to the target capital structure adjustment is relatively fast,indicating that the undervalued stock price romote the use of debt financing to complete the capital structure adjustment.The fifth chapter attempts to combine the specific refinancing policy of listed companies-how to use the mispricing of capital market from the perspective of the major shareholders' participation in the private placement and to reveal the preference law that the major shareholders tend to participate in the private placement when the stock price is undervalued.The empirical results show that: First,the major shareholders prefer to participate in the issuance of private placement when the stock price is undervalued;and the greater the undervaluation,the greater the enthusiasm of the major shareholders to participate in the private placement.Second,when the stock price is overvalued,large shareholders are more inclined to choose a low proportion of subscription;and,the greater the degree of overvaluation,the lower the proportion of major shareholders subscription.The greater the degree of undervaluation,the greater the proportion of the largest shareholder of the subscription;Third,the major shareholders involved in the private placement,the greater the undervaluation of the stock price,the the better long-term market performance;Fourth,the major shareholders to participate in the subscription,the long-term market performance of private companies after issuance is significantly higher than the long-term market performance after the issuance of state-owned companies.In addition,the long-term market performance of private companies is higher than that of state-owned companies.Chapter 6 aims to provide a new explanation for the motive of the stock dividend from the perspective of the mispricing of the capital market.This paper investigates motivations and economic consequences for firms to pay stock dividends from the perspective of stock mispricing.We find that firms paying stock dividends are,on average,undervalued at the end of fiscal year and firms traded at a greater discount are more likely to pay stock dividends.This finding indicates that value enhancing is the main motivation for firms to pay stock dividends.Furthermore,the announcement effect of undervalued firms is significantly positive and the valuation improvement associated with stock dividends remains in the long run.At the same time,there exists overvalued firms paying stock dividends;however,the valuation improvement for these firms disappears in the long run.Finally,firms paying stock dividends are more likely to be sold by insiders than non-paying firms,especially those that are overvalued.Our study sheds lights on the puzzle of stockdividends by listed firms and related regulatory policies.The seventh chapter is the conclusion of the paper and give some possible future research topics.