A Comparative Study On Stock Rations And Re-issuing New Shares

The refinancing of listed companies in China has become a universal phenomenon, especially stock rations and re-issuing new shares, this plays an active role in the development and growth of listed companies. According to the history of equity refinancing, re-issuing new shares were becoming increasingly popular during these years. So that the stock rations have declined. Some scholars have found that the costs of stock rations were obviously lower than the re-issuing new shares, but the fact is that the listed companies prefer re-issuing new shares to the stock rations. Why? This question has been called the mystery of equity re-financing.There were financing hungers in almost every listed company in China. A clearer phenomenon is having a strong preference for equity refinancing. If the stock rations will disappear with the development of re-issuing new shares and the economics? In this context, we compare the differences of stock rations and re-issuing new stocks will be practical significant.Research purposeIn this paper, we analyst the differences of the two main types of listed companies refinancing equity method. The comparative studies include issuance conditions, distribution costs, and the efficiency of equity refinancing. And last, this paper tries to achieve the following two purposes:1. Providing some additional explanations to the mystery of equity re-financing through the comparative study of reissuing conditions, financing costs and the efficiency of equity refinancing.2. Try to provide some useful advices after the analysis of the efficiency of equity refinancing.Main structureThis paper has 6 chapters; the main structure is as follows:Chapter 1:introduction. This chapter illustrated the research background and target, content and method, research frame and innovations etc.Chapter 2:literature. This chapter reviewed some of the basic theories, such as MM theory and the classical pecking order theory. Meanwhile, this paper described four different re-financing option advocated by literature.Chapter 3:The equity refinancing theory of listed companies. This chapter introduced the refinancing, equity refinancing, stock rations and reissuing new shares, firstly. And then outlines the purposes of the equity refinancing. This chapter also introduces the status of foreign equity refinancing and analysis current explanation of mystery of equity refinancing. These explanations will be better for the following research. At last, this chapter discusses the Chinese specific situation and the basic comparison of the stock rations and reissuing new shares.Chapter 4:the comparison of issuing conditions and financing costs. The mystery of equity refinancing issued that the orders of reissuing new shares is more difficult than the stock rations and the cost is higher also, but listed companies preferred reissuing new shares to stock rations. Through the analysis of chapter 4, it is not hard to find that the listed companies like use earnings management, and the cost of reissuing new shares is not higher than stock rations in China.Chapter 5:the financial efficiency of these two. This chapter illustrated the efficiency after equity refinancing, and to explain the mystery of equity refinancing, this chapter compare the efficiency of reissuing new shares and stock rations by positive methods.Chapter 6:conclusion, recommendations and the limitations of the study.The main contributionsIn this paper, a combination of normative and empirical method is used to explain the mystery of equity refinancing in Chinese listed companies. This research will provide some useful explanations of why the listed companies in China preferred the reissuing new shares to the stock rations. And after this research, it provides some useful suggestions for listed companies when they need to chose from reissuing new shares and stock rations.