The Rearch Of The Markt To Book Ration On The Effect Of Chinese Listed Companies' Capital Structure

For the hypothesis of capital market efficiency is oppugned in assets pricing empirical studies, behavior and psychology are introduced in corporate finance. Equity Market Timing refers to the practice of issuing shares when they are overvalued and repurchasing them when undervalued, which is on the base of investor irrationality. Capital structure is the outcome of finance decisions in some period of time, and as a result the effects of market timing on equity financing decisions may also play an important role in changes in capital structure. In China capital market, great differences exist in financial environment, corporate equity structure and real pecking order from other capital markets. The phenomenon that China corporations prefer equity financing can hardly be unpuzzled by traditional pecking order theory. In order to apply equity market timing theory into China capital market, we need empirical support to discover whether this theory has favorable explanatory power in China practice. If historical market valuations have practical effects on the financial policy and the capital structure of China corporations, it will be required to analyze how great the effects are and how long they will last. In this paper, we discuss the effects of market timing theory, especially market-to-book ratio, on Chinese listed companies' capital structure stage by stage in China capital market, including the short-term impacts of stock valuation on the financing implement selection, the long-term effects of historical market timing on capital structure and cumulative changes in leverage, the persistence magnitude of the effects, and the analysis on the basis of different industries. The outcomes indicate that market-to-book ratio have momentous influence on China corporate equity financing decision, and the corporations with high valuations prefer to issuing equity. The market timing affects capital structure in a long range, and the effects even accumulate as firms age.