The Financial Effect And Market Effect Of Preferred Stock Financing

As a way of equity financing,preferred stock has been very popular and widely used in western countries,but Chinese preferred stock is still a relatively new financing way,and began to enter the capital market formally until 2014.The using of preferred shares for financing can increase the enterprise's equity capital,it will not disperse the control of the original shareholders,but can reduce the asset liability ratio of the enterprise.With the development of Chinese capital market,the financing problem has become a stumbling block on the road of the enterprises'development.The issuance of preference shares just solve this problem,providing a new way of financing for enterprises,to promote the development of enterprises.Although our preferred stock pilot limited to the SSE 50 Index constituent stocks of the company,but from November 2014 to October 2017,there were 23 listed companiesapplied for and approved the issue of preference shares,up to 46%.Obviously,preferred stock financing has been very popular among related companies in Chinese capital market.In this case,this paper studied the following problems by combining the specific cases of KangMei pharmaceutical:The company will choose the issuance of preferred stock for what motive?What kind of financial effect can the issuance of preferred stock have on the company?What is the impact on the market value of the company's stock?How can the company improve the financial effect and market effect of preferred stock financing?In this paper,the first issuance of preferred stock financing of pharmaceutical enterprises-KangMei pharmaceutical is the research object.On the basis of summarizing the domestic and foreign scholars' research on preferred stock,this paper introduces the definition of preferred stock,the theory of preferred stock,and the development process of preferred stock at home and abroad.From the perspective of the specific case of KangMei pharmaceutical,this paper analyzes the financial effect and market effect after the issuance of preferred stock.The study found that:(1)the issuance of motivation,as a kind of preference shares of equity financing,it can increase the equity capital scale,enhance its ability to raise debt funds,which helps enterprises realize the scale expansion better,and promote the implementation of the strategy,the whole industry chain of traditional Chinese medicine.(2)As for the financial effect,preferred stock is a double-edged sword".The issuance of preferred shares by KangMei pharmaceutical company enables enterprises to obtain long-term stable capital,and protect the interests of major shareholders not to disperse,improve the solvency of enterprises,but operating capacity and profitability declined.It is due to the expansion of the scale,the company did not realize the effective management of its substantial increase in assets,resulting in the decline in asset turnover,corporate profitability indicators decline.Therefore,the issuance of preferred shares requires higher management ability of enterprises,and enterprises should pay more attention to the construction and training of management team.Only in this way can the effective management of enterprise assets be realized.(3)from the market perspective,the KangMei pharmaceutical company after the issuance of preference shares,the excess return and the cumulative excess return rate was negative,indicating that investors believe that the KangMei pharmaceutical issuance of preferred stock will not enhance the value of the future of the enterprise,thus did not make the stock price rise.There are the following important enlightenment to KangMei pharmaceutical industry preferred stock financing from financial effect and the market effect:the promotion of enterprise value is not only affected by the financing constraints,lack of operation and management capability is the main reason.Therefore,only when both operation and management ability of the enterprise are relatively good,or has been fully promoted,the expansion of financing ability can bring the promotion of enterprise value.These findings provide some experience for companies that issue preferred stock financing,and also have guiding significance for promoting the development of Chinese preferred stock market.