Research On Financial Distress Costs Of Listed Companies

FrancoModigLiani and MertonMiller(1958)put forward MM theory called by modern financial theory that capital structure bears no relation to the enterprises'market value in the condition of no corporate income tax and other assumptions. However, because the tax system and the bankruptcy punishment objectively exist, MM theory is not perfect. Trade-off theory loosens its assumptions, considers bankruptcy punishment factors, and introduces the financial distress costs. The financial distress costs become one of the latest issues concerned by the domestic and international scholars.This paper analyses financial distress costs in the view of the stakeholders theory. The paper indicates that financial distress costs refer to the sum of stakeholders' costs caused by the enterprise during the financial distress period. Financial distress costs may be classified into four subcategories: real costs borne directly by the enterprise,real costs borne directly by the shareholders, real costs borne directly by the creditor and real costs borne by other parties. At the same time we establish the theoretical frame of financial distress costs.This paper takes listed companies as the research object, chooses special treatment(ST) company because of the abnormal financial condition as the symbol that the enterprise falls into financial distress, uses operating achievement view, and finally discovers that the financial distress makes listed companies not only pay costs but also get the welfare effect. In the equity value view this paper discovers that the shareholders really bear some financial distress costs. Using multielement linear regression to analyze influencing factors of the financial distress costs, the paper discovers the corporate government, corporate characteristic and external environment are obviously relative to the financial distress costs. Embarking from the above research conclusions this paper gives some advice that establishing the prediction system of financial distress, and perfecting the mechanism of corporate government and the corresponding law system policy, in order to provide the policy-making reference for distressed companies to get rid of the financial distress or reduce the financial distress costs, promote the sound development of the listed company, and realize the rational distribution of social resources.