Research On Issues Of Establishing Preferred Stock System In China

In2013November, the Chinese State Council formally issued "State Departmentguidance on carrying out a pilot preferred stock". With the globalization of the marketeconomy, China’s financial market is comprehensive with the world, where thesystem of preferred stock in the financial markets as one can effectively improve theeconomic efficiency of market forces has been adopted in many countries for centuryyears, for integration with global financial markets and improve market economies, itis imperative that China establish a system about preferred stock.In order to reflect the necessity about the preferred stock system which establishin China, this article describes the background in the introductory section, while havean understanding about the research status and development trend of the preferredstock system. The main part of this article researches several questions of preferredstock system in-depth from the following four sections in China. In the first part, firstby describing the concept and characteristics of preferred stocks showing an overallsituation of preferred stocks; followed in order to more clearly reflect the flexibility ofpreferred shares the right to set brings advantages, in this part of the preferred stocktypes have also been introduced; finally demonstrated the accounting treatment ofpreferred stocks, convertible preferred stocks which accounting treatment is mainlyabout content. In the second part, through to analyze the pecking order theory andsignaling theory, we get the theoretical basis of the preferred stock system. In the thirdpart, focused on the advantages of preferred stock system to analyze, firstly, accordingto the preferred stock can promote dividends of listed companies, and be able to playthe advantages of preferred stock in the merger and the acquired, to analyze thesystem analyzes the benefits of the preferred stocks for the enterprise; followed toanalyze the benefits of the preferred stocks for investors and the overallmarketrespectively; finally analyzed by a bank as a preferred stock financing case, thesystem has a positive effect derived preferred stocks. In the fourth part, describes the establishment and improvement of the preferred stock system in China, first tell usChina has met the basic conditions for the implementation of the preferred stocksystem; secondly discusses there is surviving a blind spot in our preferred stocksystem; finally, the blind spot is found improve the preferred stock system somesuggestions.This article through above analysis to get the results that, if the establishment ofthe preferred stock in China, it will enable enterprises in the financing process moreinclined to issue preferred stock system, as preferred stock financing can effectivelyprevent enterprises to issue shares is overvalued in the financing behavior,Attractingthe attentionof investorsand improvecorporate financingcapacity, reduce thepressure which come from corporate dividendsand refinancing,bring huge economicbenefits for corporate finance,investorsalsowillbring benefitto the overallfinancialmarkets.In this article, there usethe overallvalue advantage ofpreferred stock todescribed the reasonablenessand necessity of preferred stock system whichestablishmentin China.