Research On Enterprise Refinancing And Long - Term Performance

In1990s, with the growing and maturing of China’s capital market, enterprises in China, whose capital was solely from the government and the bank, began to search for diversified financing support. The new emerging capital market is fulfilling the great financing demanding of china’s enterprises. Nowadays, it becomes a hot topics for the academic and investment people to do research on financing and refinancing of public companies.This essay is aiming to find the relationship between financing and the firm value through studying on the after-financing long-run performance of a firm. We hope to propose some significant ideas to optimize firm’s capital structure and increase firm value.There are two parts included:theoretical research and empirical research. In the former part, we introduce the development history of the financing theory in Western countries, as well as the representative theories. Then we analyze the financing decision from behavioral finance’s perspective. Finally, the main methods and conclusions in after-financing long-run performance research by scholars home and abroad are introduced in this part.In the latter part, the empirical research part, we investigate the relationship between financing and the firm value by evaluate firms’after-financing long-run performance. So we use the high growth companies listed in A-share, during2002and2011, as our studying samples. And then we take Ritter’s (1991) method as reference, and use those who have similar cross-sectional properties to the studying samples as matched samples. The return difference between studying samples and matched samples is the abnormal return caused by financing decisions. Finally, we analyze the different effect of debt financing and equity financing by comparing the debt-financing-firm group and equity-financing-firm group.The empirical result shows:1. On average, the firms doing equity financing are larger, performing better and financing more, but with lower B/M ratio.2. The firms with debt financing don’t have abnormal returns while the firms with equity financing have negative abnormal returns compared to the matched firms during the3year period after financing.3. Debt-financing-firms perform better than equity-financing-firms in the long run. In a word, in spite of the bigger size and better pre-performance, firms with equity financing have bad performance after financing decision, which indicates the negative effect on the firm value of the equity financing.