A Study On The Financing Structure Problems Of Chinese Listed Corporations

Since MM theorem emerged in the 1950s, the research of the corporate capital structure is one of the hottest issues in the international financial theory fields. Western economists studied the capital problems from different point of views such as tax revenue, bankrupt cost, agency cost and information asymmetry , etc. and the study has formed a relatively complete theory and empirical methods. Accompanied with the healthy and steady development of China's economy, the continuous perfection of Chinese capital market mechanism and the deepening financing system reform, Chinese listed corporations will have more financing channels. At this time, it is especially important to study the financing behavior of Chinese listed corporations.According to the "Pecking Order Theory" , retained earnings is given the first priority in corporate financing, debt financing is the second, and equity financing should be the last. This theory has been supported by the corporate financing practice in developed countries. However, when we observe and study financing practice of Chinese listed corporations, the result turns out to be contrary to that of developed countries. Chinese listed corporations prefer the external financing, and Equity financing is put in the first place while debt financing is seldom adopted. Equity financing preference emerges in Chinese listed corporate financing. This financing practice is contrary to western mainstream financing theory. The research of the financing structure of Chinese listed corporations and the governance of variation phenomenon in the financing decision-making will help listed corporations to optimize their financing structure and governance structure, improve their business management, increase their economic efficiency, and thus maximize the value of enterprises. The research of the financing structure of Chinese listed corporations will also help to enhance the efficiency of the allocation of the economic resources in the whole society, which is of great practical significance in the Chinese capital market's healthy development and the socio-economic growth.This thesis draws lessons from the research results of the domestic and international theory, combines the actual conditions of our country, and research the financing structure of the Chinese listed corporations. The main content of this thesis includes:Chapter One: Foreword. This part points out the significance of the topic and the research objective, introduces the research ideas, general framework, research methods and the main innovations, defines the relevant concepts of financing structure, recalls the major domestic and foreign research results, as well as systematically expounds corporate financing structure theories.Chapter Two: The analysis of the current situation of Chinese listed corporations' financing structure. On the basis of defining the financing concepts and elaborating financing theories, this thesis uses statistics analytical methods to draw the basic features of Chinese listed corporations: the debt-to-asset ratio is relatively low; in the financing structure, the internal financing occupies a relatively low percentage, while the external financing gains the absolute proportion; in the external financing structure, the equity financing preference is obvious; in the internal financing structure, the proportion of the short-term debt is much larger than the long-term debt.Chapter Three: The main factors that influence the Chinese listed corporations' financing structure. This thesis analyzes the main factors from two points of view: macro-market factors and Micro-enterprises factors. Macro-market factors include financing costs and the development of Chinese capital market. On the one hand, the actual costs of the equity financing are lower than that of the debt financing in the Chinese capital market, therefore listed corporations has the equity financing preference; on the other hand, the development of the Chinese capital market is imbalance. While the stock market has experienced quick development and rapid expansion in scale, the bond market has not developed at the same speed because of the policy constraints, the slow development of the circulation market, as well as the restricted interest rate mechanism. Moreover, the long-term credit market is relatively stagnant. Owing to the above factors, Chinese listed corporations' debt financing channel is sluggish, and they usually resort to the equity financing to access funds. Micro-enterprise factors include the performance of the listed corporations and the corporate governance. On the one hand, the weak profitability of Chinese listed corporations obstructs the debt financing. This is because the higher proportion of debt financing would brings the higher financial risk and bankruptcy risk. When the corporation does not perform well, relatively higher debt ratio can easily cause financial distress, or even cause bankruptcy; on the other hand, the special governance structure and the internal control phenomenon are the root causes of the special financing behavior and financing structure of the Chinese listed corporations.Chapter Four: Countermeasures and proposals to optimize Chinese listed corporations' financing structure. The main contents of this chapter include: correct the listed corporations' equity financing preference by improving the equity financing system, improving the mechanism for withdrawal from the stock market and raising equity financing costs; improving the market-oriented reform of the banking system and vigorously developing the bond market to enable listed corporations to open the debt financing channels; optimize the governance structure of listed corporations by improving the ownership structure, establishing an effective interests incentive mechanism, building an effective internal control system and an external constraint mechanism; improving the environment and the implementation mechanism of the disclosure of information, as well as transforming government functions and improving laws and regulations to continue to enhance the efficiency of the capital market.