A Case Study On Issuing Preferred Stock Of Chenming Paper

Before 2014,the preferred stock system in China had not yet been established,which can not be adopted by the domestic capital market.In the face of increasing demand for financing,the traditional financing methods had been unable to meet the needs of enterprises,and the capital market urgently needed new financing products.In 2014,the preferred stock system established,indicating that the development of China's preferred stock system had entered a new stage.As a new financing tool,preferred stock has dual characteristics of equity and debt financing,which can effectively help enterprises to raise funds,broaden the financing channels of enterprises,and be welcomed by the capital market.On the basis of the existing research,this paper uses case study method to study the listed company of papermaking industry-Chenming Paper,which has issued preferred stocks to raise money.Firstly,combined with the development of paper industry and the company's own situation,this paper introduces the background and process of the preferred stocks issuing to us.The paper also introduces the important terms of its issuance plan.Then,by using event study method,this paper analyze the reasons why Chenming Paper issued preferred stocks and its impact on the company after issuing,so as to test its effect and draw some conclusions.According to research,it is found that Chenming Paper choose the preferred stocks to raise money for the purpose of optimizing the company's financial position and maintaining the stability of the company's control.After the issuance of preferred stocks,the company's asset liability ratio is effectively reduced,and its debt paying ability has been raised.Meanwhile shareholders' equity have not been diluted,a good market reaction has been achieved,and the stability of corporate structure has also been maintained.After studying the case of Chenming Paper,we can draw some conclusions:First,issuance plan should conform to the actual situation of the enterprise and pay attention to enterprise's cash flow.Second,we should balance the rights and interests between the common shareholders and the shareholders of the preferred stock.Finally,choose the right time for the issuance of preferred stock.