China's Listed Companies Equity Financing Preference

The different combination and allocation for the capital resource result in different capital structure,capital cost, benefit confliction, and financial risk, which affect the market value of the corporation. How to coordinate the debt and stockholders'equity by financing is not only the common goal of stockholders and creditors, but also the study focus in financial field. We call it corporation financing theory in economics.The financing action is the realistic problem of corporations facing to the market. The basic problem it could resolve is to acquire capital the corporation needed and arrange proportions of different capital resource, to coordinate the financing risk and financing cost. The corporation financing theory developed quickly from 1958, at which time Modigliani and Miller put forward MM Theory. We could use the experience of the study method, analysis train of thought, and some basic conclusion for reference, to do some research for the Chinese corporations.A problem is the foreign theory may not accord with our realities because of the different economic environment. In the mature markets such as America, the corporation is an independent financing subject, which has hard budget control. However in China, the corporation is not an independent subject, which is affected by the special economic environment. So the corporation in China has the special character, which may lead to the difference.Opposite to The Pecking Order Theory in mature financial market, our listed corporations have the preference of the stock financing. Because of the special structure of the corporation governance, hyper-preference of stock financing would reduce allocation efficiency of financial resource from two aspects. On the one hand, the national stockholder could get profit by invading rights of other investors, which may reduce the capital...