Behavioral Analysis Of Chinese Listed Companies' Stock Financing

This paper first analyzes the financing structure of listed companies in China by empirical examination. It points out that the proportion of internal financing in totalfinancing amount is very low and the proportion of external financing is higher than that of internal financing. Further more, the proportion of stock financing in external financing is even higher than that of debt financing. So the financing order of listed companies in China is stock financing, debt financing, and internal financing and the distinguishing characteristic of Chinese listed companies' financing structure is stock financing preference.Chinese listed companies' stock financing preference violates the traditional financing theory. The literature on the analyses of stock financing preference is far too large in recent years at home but these researches still have some limitations. Combining with the behavioral financing theory and using correlative literature at home and abroad for reference, this paper builds different models under the market inefficiency hypothesis to study the intrinsic and extrinsic motivation of Chinese listed companies' stock financing preference. The conclusions are as follows: (1) The mispricing in the stock market is the extrinsic motivation of Chinese listed companies' stock financing preference. There are two considerations of stock financing preference. First, if managers anticipate that the return of the investment will lower and will fluctuate in the future stock financing will be better than debt financing when the stock is overvalued. Second, when the stock is overvalued managers just finance for some overvalued investment. This investment hasn't any value at all and the real purpose of managers is to raise capital at low cost. (2) Non-circulating shares concentrated excessively are the intrinsic motivation of Chinese listed companies' stock financing preference. The holders of non-circulating shares can obtain excess return from share allotment and seasoned equity offering by encroaching interest of other shareholders directly and indirectly.Chinese listed companies' stock financing preference goes against the efficient allocation of recourses so this situation must be changed. Two aspects -exterior market and interior motivation - must be considered to change this situation. That is to say, two approaches - improving the pricing efficiency of our equity market and reforming the equity structure of listed companies - can be adopted to change listed companies' stock financing preference and optimize the allocation of recourses.