The Application Research Of Preferred Stock Financing Of Z Company

Preferred stock is a internationally popular stock type,having an important position in various financing channels of enterprises as well.In the environment of relatively developed capital market in western countries,the preferred stock has been widely used in financing activities,its effect is also widely accepted.As our economy size increases and economic institution matures.Our country's preferred stock system develops well in the support of relevant policies,meeting demands of investor for investment product diversity and of enterprise for financing method and channel diversity.Since “Administrative Methods of Preferred Stock Pilot Project” was issued,33 listed companies have planned to issue preferred stock and announced issuance plan as of Dec.31,2016,19 of which have passed review by CSRC,issuing amount totaling RMB 349 billion.Being a large state-owned construction enterprise,Z dramatically increases demand for floating capital for operation in recent 3 years with rapid expansion of domestic rail transit construction in size and implementation of strategy of expanding overseas market.Previously,the company's main financing method was issuing long or short term bonds and borrowing money from banks.This financing strategy result in oversize of debt,yearly increasing asset-liability ratio,breaking through the regulatory requirement of “asset-liability ratio non-industrial central enterprise shall not be above 80%” very soon.This condition limits further implementation of the company's operational strategy to some extent: first,Z is in construction industry,whose common features decide that relatively slow capital withdrawal easily causes shortage of floating capital,resulting in breakage of capital chain.Second,high asset-liability ratio makes it is very difficult for the company to further get loan from banks.In this case,Z follows national policy orientation immediately,issuing preferred stock timely to ease the difficult condition of insufficient floating capital and asset-liability ratio breaking through regulatory threshold.By analyzing the case of Z issuing preferred stock,we researched the cause and plan choice of listed company issuing preferred stock,further analyzing change of financing cost,capital structure of the company and response of market,as well as risks faced by the company,common stock holder and preferred stock holder.Finally,we got some enlightenment for supervisor,preferred stock issuer and buyer through the case of Z issuing preferred stock.Through the research we can fins that the cost of preferred stock financing is lower compared with that of common stock,helping the company obtain long term and steady capital,optimize capital structure of the company to some extent,improve the company's ability to resist risk.Furthermore,our country's stock-holding reform of state-owned enterprise can be deepened further by issuing preferred stock,which is mainly embodied where this kind of stock makes investors have more diversified investment channel and method,eases current pressure on stock market to further stabilize capital market by increase stability of capital.