Study On Unusualness In Financing Of Listed Companies In China

The most famous MM theory and the modern capital structure theory, have already been demonstrated theoretically and empirically by scholars of west countries, who generally identified with such financing law that, firms usually raise their financing in pecking order: internal equity financing, debt financing, and then external equity financing, because the cost of internal equity financing is the lowest and the cost of external equity financing is the highest. While, for the special ownership of listed companies in china, they show a totally opposite financing structure with the modern capital structure as a whole. Through empirical analysis, in the capital market of China, the proportion of internal equity financing is less than that of external equity financing. Therefore, listed companies in China raise their financing in opposite order: external equity financing, debt financing, and then internal equity financing. After detailedly analyzing the development condition of capital market and the causes of unusualness in financing of listed companies in China, this paper studies the essential motivation and value-orientation of the listed company in China, and at the same time, modifies the Miler Model more suitable for the situation of our country. Furthermore, we verify the modified model by citing the typical cases and studying the whole financing conduct of listed company in China. According to this paper, the main reasons of unusualness in financing of listed companies in China are in three aspects: firstly, as the different interest gameof shareholder and the complex equity structure, the problem of the selection of the corporate objective function is more complicated and the listed companies in china choose to maximize the controlling shareholders' interests. ; moreover, due to the lower dividend allotted policy, the cost of external equity financing is less than that of debt financing; last but not least, owing to the limitations of system of financing, external equity financing might supply more chance of finance fraud and bribery than debt financing. In a word, the distinct and complicated environment of our assets market is the main reason of the problem. Recently, the environment of our capital market has been changing greatly. This paper, from the view of the reform of China, puts forward the reasonable financing order suitable to listed companies in China: to companies in the period of maturation, their financing order is debt financing, internal equity financing, and external equity financing; to companies in the period of growing, their financing order is external equity financing, internal equity financing, and debt financing. In order to protect and accelerate the development of this market, we should take basically four actions to protect the public investors' benefits. Firstly through decreasing the state-owned shares step by step and by splitting state-owned shares into relatively equal shares held by legal persons, improving the listed company' s capital stock structure; secondly, partly limiting external equity financing should be brought forward; thirdly, by reforming the system of financing, establishing system of credit, correcting listed companies' behavior of external equity financing; and last, developing corporate bond market is actually necessary in china.