Preferences For Equity Financing Behavior Of Listed Companies In China

With the development of the market economy and the establishment of the modern enterprise system, a listed company can raise money with many kinds of methods. Therefore, how to build the best capital structure becomes the focus of a company's financing management. The results of western research showed that the best capital structure should be the right combination of equity and debt. In China, however, there is a strong preference for equity financing in listed companies and the low efficiency of using equity capital is also a popular problem.The study on capital structure in our country is mostly focused on empirical research now. Theoretical research, especially the research applying the standardized economic norm to the analysis of financing behavior is almost blank in China. There is a great need in companies and the administrators for a mature capital theory. Under such background, thispaper intends to combine the application of the popular economic analysis tool--gametheory--with the practice of Chinese securities business to analyze a few companyfinancing problems in order to make some helpful attempts. Firstly, the article makes a simple introduction to the basic theory of corporate financing. Secondly, the article analyzes the present situation of financing behavior of listed companies in China, and points out that listed companies always have excessive preference of equity financing to debt financing. Thirdly, the article builds models for equity financing and bond financing separately with the methods of Game Theory. By comparing the two kinds of models, we received a result of pooling equilibrium, then the article put forwards some proposals to rationalize financing behavior of Chinese listed companies according to the result.