China's Listed Company's Capital Structure And The Timing Financing

MM theorem that "the market value of any company unrelated to its capital structure, but depends on the degree of risk in accordance with their corresponding expected rate of return to capital of the expected level of return." But in China's capital market, the company's equity financing activities are linked with fluctuations of the stock market. The study of the relationship between Chinese listed company's capital structure and the timing of equity financing is to understand the change in capital structure of Chinese listed companies, and to determine the equity financing policy and maintaining the balance of the equity financing market supply and demand, and realize the stock market's stability, of great significance.In this paper, we set the MM theorem as a benchmark, from the perspective of modern behavioral finance to discuss the relationship between the timing of corporate equity financing and capital structure changes, to explain the reasons for deviation from MM theorem. This study under the assumption of the company equity financing rationality, namely:corporate equity financing decision-making depends on the contrast between the equity market value and the company's expects value, equity financing costs affect the company's return on capital employed, drawing on the research framework Baker and Wurgler, select the market hot index (M/B), net equity financing(NER), using listed companies'in China the latest financial data to conduct empirical research on the financing problem.The empirical results show that:(1) in the data sample period, the listed company in China do exist the timing behavior of equity financing and debt financing; (2) A listed company's equity financing of the market timing behavior of short-term significantly impact on the company's capital structure; (3) equity financing of market timing behavior have a sustained impact on the capital structure of listed companies in China; (4) In China, the listed companies' capital structure has deviated from the MM theorem in short-term and long-term trend to the characteristics of MM theorem, the stock market fluctuations have a significant effect on its capital structure.It can be inferred from the empirical findings:In the stock market, corporate has rational finance behavior, while investor of irrational behavior. Thus, it has important policy implications to relax government control, increase the market equity supply, which could balance the relationship of supply and demand, stable company's capital structure, reduce the often irrational behavior, and improve market efficiency. Although the buyers of the equity market have irrational behavior, the sellers have the ability to choose the best time for equity financing. From the view of market equilibrium, as long as there is sufficient equity providers, rational behavior will be able to balance the irrational behavior; we can achieve a stable capital structure, so that the company's value can be founded under the expected value of the company.