An Investigation Into Capital Composition Of Listed Companies In China

In the recent years, the listed companies in China have hankered after increased issue and quota of equity financing, to which holding shareholders, circulation shareholders and the corporate management have sharply different reactions. The author of the essay at first cites the figures between 1997 and 2002 from the company he works for as samples to analyze the problem. The positive analysis indicates that listed companies in China rely excessively on equity financing. It also proves the fact that they depend more on external financing than their western counterparts; in other words, our listed companies have few long-term liabilities or total liabilities, and there is higher interest ratio in the total capital. Compared with other countries, the capital composition of our listed companies assumes peculiar features, quite different from the practices in the west and from the classic theories of capital composition there.Against this background, the management, the participants in the capital market and the theoretical world have studied the issue from different angles. However, the author of the essay reexamines it with emphasis on equity negotiability and actual controllability of the listed companies. It follows that in the times of multi-equity, the controllability of the listed companies at home is divorced from claims, that is, there exists the "absence" of holding shareholders, and circulation shareholders are denied voting right, while the management of listed companies turns into real controllers of the enterprises. Thus risk control is most likely to make the corporate management unwilling to ponder the risk of bankruptcy due to liabilities. Driven by more profits, the real controllers of the enterprises will seek equity financing targeted to increased net assets and net cash flow.Unique capital composition brings about disintegrated operations of equity financing and creditor's right financing in the domestic capital market. The consequences are worth openly debating: too much equity financing can't promote the utilization of funds, and state-owned listed companies, the "occupants" of social resources, lead to unsuccessful financing for non state-owned enterprises.