Corporate Debt Financing Order To Study Under Asymmetric Information

Corporation financing is an important area of modern micro financing theory research. Debt financing is one of most patterns of corporate outside financing. Since Modigliani & Miller' research on corporation financing in 1958, all the research afterwards break through hypothesis supported by MM theory and discuss the role of debt financing. Especially when asymmetric information appeared, capital structure theory has a great leap. On this basis, Myers put forward the pecking order theory. The main viewpoint is when financing, the corporation will first choose internal financing, and then debt financing, and finally stock financing. This paper is a revise of the pecking order theory, and discusses the financing order of three major debt financing implements: bank loans, corporation bonds and tenancy.The paper first review the capital structure theory on a new angle, and illuminate the fact that the development of the capital structure theory and the research on debt financing influence each other. Debt financing has an important position in the capital structure theory, which provide theory basis for further study.And then the paper analyses how do adverse selection and moral hazard influence the debt's sequential choice of enterprises, because of the cost's increase caused by information asymmetry. Based on the theoretical analysis, some conclusions are drawn as followings: Take adverse selection and moral hazard into account, debt financing order is tenancy, bank loans and corporation bonds.Finally, the paper analyses the debt financing order in our country. Corporations in our country mainly depend on bank loans, and few prefer corporation bonds and tenancy, which is different from the order concluded by the theory. On this basis, the paper analyses why this order comes into being and bring forward some suggestions to optimize the debt financing order in China as flowers: lower the asymmetry of information and develop leasing markets.