Analysis About Corporations' Financing Preference In Our Country In Terms Of Cost

Some western financing theories suggest that the cost of financing plays a key role on the corporate financing decision and thus the capital structure. Pecking order theory taking accounting of information asymmetry considered that the corporate financing order is internal financing, then debt financing, at last equity financing. This article researches how the costs of financing affect the corporate capital structure mainly through the comparison between Chinese and western corporations. At the same time the costs of financing are influenced by kinds of factors, and different industries have different preference about financing. From the analysis we can conclude at last that some Chinese corporations prefer to equity financing, some others prefer to "bank credit financing" being part of debt financing. Finally , some policy advice are given by the writer.