The Study Of Enterprise Financing Decision Based On Tirole Corporate Finance Theory

The capital is the key to enterprise development. Under the situation of socialistmarket economic system, enterprises take the responsible for their own profits andlosses. Financing activities play an increasingly important role in the growth of theenterprises. Financing scale and structure must be taken into consideration whilebusiness operators make decision.This article synthesizes existing research results to guide enterprises on financingdecisions, such as the theoretical results of the MM theory, the trade-off theory, agencycost theory, the debt covenants theory, pecking order theory and signal model theory. Itcombs the existing achievement about financing decision-making issues, and makescomparative analysis.Then the article illustrates the advantages and disadvantages of equity financingand debt financing. Assuming the case when an enterprise is at the corner to makefinancing decision, it demonstrates how the enterprise selects the financing structure tomaximize their income. We list two different types of enterprises, start-ups andrefinancing enterprises respectively, and build the enterprise’s financing model, as aproject manager of enterprise, based on Jean Tirole Company’s financial models.Eventually, the best decision-making solution for the project managers is disclosedthrough the derivation and calculation of the models, the article also illustrates whatkind of model should be applied when enterprisers select financing structure, and givessome valuable suggestions.At last, this article demonstrates a case to validate the theoretical researches resultsand models, which are proved to be in line with the case study. When enterprisers facedthe matter of debt financing and equity financing, they usually preferred debt financing.However, since debt investors excessively demand the income of the project,enterprisers have to accept that part of financing is turned to equity, in order to meet therequirements of the debt investors.