Equity Mispricing And Corporate Financing

Financing is an important behavior of the company,and it is also an important link between the related capital market and the real economy.In the real capital market,the phenomenon of stock price deviation from its basic value exists for a long time because of information asymmetry,investor irrationality and arbitrage restriction.The existence of equity mispricing adds complexity to the company's decision-making,but also provides them with the opportunity to enhance their basic value through financing activities.So,how does stock pricing bias affect corporate financing? How does the capital market view the financing activities of a company? The research on these issues is of great practical significance in the context of the policy of promoting multi-level capital market construction and realizing capital market serving the real economy.Most of the existing literatures on how stock market misvaluation affects equity financing and capital structure are based on trade-off theory and market timing theory.Few literatures have studied the impact of stock mispricing on retained earnings,debt financing and implicit equity financing.It is also rare to study the financing effect of equity mispricing combined with agency problem.Therefore,based on the fact that stock mispricing widely exists in the real capital market,this paper evaluates the basic value of the company's stock by using the company's financial data,and then constructs the measurement of stock pricing bias.Based on the empirical data of listed companies on A-share motherboard and small and medium-sized boards,this paper examines the impact of equity mispricing on the financing behavior of Listed Companies in China.Based on various financing theories and relevant regulatory policies of China's capital market,this paper studies the impact of equity mispricing on retained earnings,equity refinancing,implicit equity financing and debt financing of listed companies,with a view to revealing the relationship between the operation of capital market and company's micro-behavior and real economy.The research in this paper not only helps people to deepen their understanding of the relationship between corporate financing and stock price,but also provides some reference for the participants in capital market.It also helps to promote the application and development of valuation models and methods in China and enrich the relevant literature of domestic corporate financing decisions.The main research contents and results of dissertation are as follows:Firstly,Taking cash dividend policy as the research object,this paper discusses the influence of equity mispricing on retained earnings of endogenous financing.The dissertation proposes the hypothesis of relationship between cash dividend and equity mispricing based on trade-off theory,market timing theory and agency theory,then uses Probit and Tobit regerssion model to test the hypothesis.The results show that equity mispricing influence cash dividend significantly;there are positive relationship between equity mispricing and cash dividend when undervalued;there are negative relationship between equity mispricing and cash dividend when overvalued.In other words,overvalued or undervalued of equity price adversely affect cash dividend.This paper tests the market effect of cash dividend,the results show that the short market effect of equity undervalued is significantly greater than the short market effect of equity overvalued.In means that the market dose not support overvalued company to pay cash dividend,the cash dividend play well of signal transmission when equity undervalued,there is no long market effect in cash dividend in this paper.Secondly,the relationship between stock mispricing and equity refinancing is discussed.Taking private placement as the research object,test expectations of control theory.The results show that there is positive relationship between equity refinancing and stock price.The further research indicates that financing constraint reinforces the positive relationship,the sensitivity coefficient of equity refinancing on equity price of private companies and small companies is bigger than state-owned listed companies and big companies.As private placement is at the core position of equity offerings in China,this paper uses single variable grouping test and multiple regression analysis to examine the impact of large shareholders' participation on the timing of private placement and long-term performance after issuance.It is found that large shareholders prefer to private placement when the share price is low,there are good abnormal return in private placement when large shareholders' participating.In addition,being state-owned of large shareholders affects the abnormal return after private placement.Thirdly,because equity incentive has the characteristics of implicit equity financing,the equity financing function of equity incentive and stock mispricing effect on it is studied.First of all,we examine the equity financing function of equity incentive,and find that whether it is using the restricted stock grant mode or the option mode,the cash flow of restricted stock grant or option exercise to the company has a significant influence on the capital expenditure of the company.We then examine the relationship between the likehood of the company to implement the equity incentive and the stock price level,and find that the willingness of the company to implement the equity incentive is generally negatively correlated with the stock price level,but this correlation only exists when the equity is overvalued.Then the paper examines whether equity mispricing affects the choice of equity incentive modes.It is found that equity mispricing have a significant influence on the choice of equity incentive modes,and the probability of choosing restricted stock grant increases with the increasement of stock price level.Compared with the non-state-owned company,non-two-power-in-one company,and high-holding company,the likehood to implement equity incentive is more weakly correlated with mispricing of state-owned company,two-power-in-one company,and low-holding company.Fourthly,the relationship between debt financing,changing of debt ratio and equity mispricing is discussed.This paper takes net debt financing and debt level as the object of study to study how the listed companies will change when their stocks are overvalued and undervalued by the capital market.In order to reasonably distinguish the overvaluation and undervaluation of stock price,the residual income valuation model is used to calculate the basic value of stock on the basis of earnings forecast model.The ratio of stock price to calculated stock value is taken as the proxy variable of stock price valuation level,and the influence of stock mispricing on net debt financing and debt level is discussed in turn.The study finds that stock pricing bias will affect debt financing of high financing constrained companies.Undervaluation of stock value will have a negative impact on debt financing of small private companies.The lower the stock price,the less debt financing of small private companies.Accordingly,the government should increase its support to private small enterprises in loan policy or other financing channels when the stock market as a whole is in a period of over-low valuation.The main innovations of this paper lie in the following aspects.The first aspect is research perspective.Firstly,the impact of capital market on corporate cash dividend policy is investigated from the perspective of individual stock based on the bias of capital market valuation;secondly,from the perspective of equity financing tools,the impact of Equity-based Incentive exercise funds on corporate capital expenditure is studied;finally,the impact of undervaluation of stock prices on debt financing is studied,which makes up for the lack of literature to discuss the impact of stock prices on debt financing..The second aspect is theoretical expansion.The agency theory is included in the study of the impact of stock mispricing on equity financing,and the conclusions and significance of behavioral company finance theory on the relationship between equity financing and stock price are expanded.It is found that the directional issuance of stocks with the participation of large shareholders and the equity incentive through the issuance of new stocks reflect the power interference of large shareholders and managers to a certain extent.The last aspect is the conclusion of the study.Firstly,it is found that both overvaluation and undervaluation of stock prices have negative effects on cash dividends paid by listed companies,but the announcement effect of cash dividends of companies with undervaluation is significantly better than that of companies with overvaluation.Secondly,it is found that both the restricted stock subscription payment and option exercise cash will have a significant impact on the company's capital expenditure,and the option exercise cash of a company with low-financing-constraint has a greater impact on capital expenditure than a company with high-financingconstraint.In addition,the correlation between debt financing and equity mispricing of listed companies is different when stock prices are overvalued and undervalued.Among them,debt financing and stock valuation level have a significant positive correlation only when the stock price is undervalued,and there is no significant correlation when the stock price is overvalued.