Research On The Financing Motivation And Economic Effect Of Preferred Stock In Agricultural Bank Of China

How to improve the capital adequacy ratio and ease the financing pressure has always been an important topic in the banking industry,for banks,as a stabilizer of financial system,the financing situation is related to the stability and development of the whole financial industry.As an attempt,preferred stock financing is conducive to meeting regulatory requirements,reducing the pressure of common stock financing,and enhancing the sustainable development ability of banks,it is of great significance to maintain China's economic stability.Preferred stock has a history of more than 100 years in western countries and has been widely used in various industries abroad.However,in China,due to the lack of clear legal system,unstable economic environment and the nature of equity and debt,the development of preferred stock is not smooth.In March 2014,China Securities Regulatory Commission issued the Administrative Measures for Pilot Preferred Shares,which first introduced the preferred shares system into China's banking industry,preferred stock has been favored by the banking industry.On October 31,2014,the Agricultural Bank of China issued 40 billion preferred shares in the first phase,and completed the initial issuance of preferred shares on November 13,2014,becoming the first commercial bank in China's capital market to successfully issue and list preferred sharesThe main problems of this paper including:Why does the Agricultural Bank of China choose preferred stock instead of other financing methods?How does the Agricultural Bank of China use preferred stock to finance?What are the advantages and disadvantages of preferred stock financing?Through this case,we can get enlightenment and suggestions,which will bring some thoughts to the financing problems of commercial banks.The research idea of this paper:the Agricultural Bank of China issues preferred shares as a case study analyzing the financing motivation and economic effect of preferred shares in the Agricultural Bank of China to evaluate the preferred shares objectively.It provides experience and reference for commercial banks or listed companies to issue preferred shares,also accelerates the development of preferred shares in China.Through the research,it is found that in order to supplement tier one capital,meet the regulatory needs,and optimize the financing structure of Agricultural Bank of China,the Agricultural Bank of China issued preferred shares in the context of domestic and international trends.It is found that the preferred stock has a significant impact on the bank's capital adequacy ratio and financial performance through the vertical comparison in each year and the horizontal comparison in the industry,however,through the study of long-term market effect,we can see that preferred stock doesn't have a good positive response to the secondary market,which shows that the issuance of preferred shares has certain risks.The preferred stock financing may also lead to risks of profitability,shareholders and investors.We should have a clear understanding of both advantages and disadvantages.Reasonably pursuing the advantages and avoiding the disadvantages.This paper combines theoretical research with case study,providing a complete case study of preferred stock financing for other companies to issue preferred stocks.As a landmark event of domestic preferred stock financing,the practice of Agricultural Bank of China's preferred stock financing has far-reaching significance in guiding domestic listed companies to broaden the choice of financing tools,optimizing the equity structure and improving corporate governance,which is benefit for the good operation of the capital market and proactively promoting the development of preferred shares in China.