Research Between The Decisions Of Corperition Debt Financing And Market Timing

The financing of the enterprise is an important financial activity, the enterprise can raise its capital effectively through the various financing ways, different financing decisions may make enterprise face different degrees of the risk management. The financing decision theory emphatically resolve the problem just like "how to make decisions", but they don’t think about that "actually how to make the decisions". So that’s the reason why the theory are far from the practical behavior deviation. The present study shows that our listed companies have obvious financing preference, such as some companies will choose equity financing first, and then they may choose debt financing, but the research about debt financing remains to be perfect. In this paper, such a view-from debt financing on the market timing, trying to find out how to make the right debt financing decision, as well as to the enterprise, and even to the whole society, the influence of financing structure.The traditional financing theory assumes that the market is perfect, and the rational people (both managers and investors) catch the pursuit of benefit maximization. But in fact, people will be influenced by all kinds of irrational factors. Finally, the people make decisions, so we must use the irrational factors to solve practical problems. Therefore, this paper, from the perspective of the managers irrational, trying to find what the company doing financing decision, especially making the debt financing decisions, how do they use market timing.The study finally found:1. The debt financing exist market timing. If the stock value is underestimated, the company will generally choose debt financing, and if the stock value is overvalued, the company will generally don’t choose debt financing. If the market interest rate is in a higher case, the company will generally don’t choose debt financing, and if the market interest rate is in the situation of low case, debt financing will be chosen by company generally.2. When manager is in risk aversion state, the higher his risk aversion degree is, he will not be willing to choose debt financing, either will he use of debt financing market timing. And then it may happen that the company should choose more favorable development of debt financing, but it chooses the equity financing because of the management risk aversion. In the end. based on the research on the divergent thinking, this paper puts forward the relevant policy advice.