Stock Financing Paradox Of Chinese Listed Companies

The main purpose of this thesis is going to study the stock financing paradox which existed in Chinese listed company. In the view of modern financial, when enterprises need to finance, it will choose the inside retained revenue firstly, then borrow the external debt and select external stock lastly. However, for the behaviors of the Chinese listed company, there is phenomenon contrary to general financial theory about outside financing, that is to say, they will choose stock financing at first and then bond when consider outside financing. This phenomenon is called "the stock financing paradox of the Chinese listed companies". This thesis mainly used empirical method to analyze the real behaviors, the reasons and the influence about stock financing paradox of Chinese listed companies. First of all, this thesis analyzed the IPO market, the ration share market, the reissuing market and capital structure of Chinese listed companies. On the IPO market, there were a large number of companies to fall over each other to IPO every year, and the quantity increased rapidly since 1992. A lot of companies made listing as their goals and some companies even cheat to list. On ration share market, almost 70% of listed companies which satisfied the conditions to assign stock chose to ration in 2000. After the tightening of these conditions in 2001, a lot of companies changed to reissue. All these indicated that there are very strong passions for stock financing in listed company of China. In addition, from the perspective of financing structure of the listed company of China, the stock financing volume of Chinese listed company is far higher than the volume of bond market, higher in proportion than that of listed companies in other countries. Secondly, analyzed the reasons from financing cost, internal interest relations and other aspects. For financing cost, this thesis calculated that the stock financing cost is 0.64 Yuan per 1 Yuan while the bond cost is more than 1 Yuan per 1 Yuan. This is the immediate cause of the stock financing paradox for Chinese listed company. For the internal interest relations, because of the separated shares and no real owner for state-run listed company, the policy makers incline to finance through stock in order to gain non-money benefits. On the basis of these analyses, a conclusion is that it is the manager's rational choice to prefer stock to bond. Finally, this thesis also expounded the influence for capital disposal efficiency, Chinese stock market development for a long term, listed company's government.