Positive Analysis On Financing Preference Of China's Listed Company

A firm's capital structure and its financing activities are closely interrelated. The average debt ratios of the listed companies in China's stock markets are lower than those of the state-owned firms in the same industries,and the ratios show a clear tendency of decline. The reason for this decline is that the managers of the listed companies prefer issuing shares than debt. Why? the author what the managers care about is neither reducing capital costs nor maximizing firm's value,but maximizing their own interests. So,the financing activities may deviate from the objectives of the shareholders,and the agency cost is rather high,which reflect the existing drawbacks of the corporate governance. In China,In the author's opinion,Those drawbacks are the key reasons which cause serious problems existing in non-negotiable shares and the stock holding structure.