The Study Of Chinese Listed Military Enterprise Equity Financing Preference Problem

Defense Industry is the pillar industry which can not only advance the development of National economy but also undertake the important role of guarding the safety of our country. Generally Speaking, international situation is peace. However there are still conflicts of interest during developments in some countries, in which military strength is involved without exception. For example, Middle East problems, nuclear issue on Korean Peninsula and war in Libya, etc. Nowadays, military strength in our country is still a little backward comparing with some developed countries. To enhance the economic and political status in the world, advance the development of international trade with other countries and maintain the image of a big country, China must greatly develop military industry and strengthen military power.With the further carrying out of economic system reform in our country, market economy is developing with a rapid speed and national economic strength grows steadily. While the development of defense industry apparently lag comparing with other big industry. Some problems such as fund shortage, oneness of fund resource and small profit margin universally occur in military enterprises. One important reason, traced to its source, is the resource of fund besides management problems, such as the lagging of development of financing mode. Fund is the blood of enterprise and also the precondition of the existence and development of enterprise. Resource of fund, which is also the financing problem, occurs in the whole period of existence and development of enterprises. So, financing problem is the key factor for the existence and development of enterprise. Bank loan is currently playing the main role as the indirect financing mode in military enterprises in our country, but has the high financing cost and small profit margin, putting great restrictions on the development of enterprise to some extends. So changing the financing mode to suit the development of defense industry enterprises is the most important and urgent thing to solve.This article takes financing situation in listed military enterprises as the object of study and makes detailed analysis by means of combination of qualitative and quantitative analysis, as well as combination of theory and quantitative data. Meanwhile, this article uses the method of comparative analysis to compare the financing situation of Xi An Aircraft International Corporation with that of American listed military enterprise group, and then make detailed analysis on problems with respects to financing method, attempting to find a suitable financing method to advance the development of military enterprises in our country.This article analyzes financing date from some big listed corporations affiliated to Aviation Industry Group and compares general financing situation with that of America Four big Military Groups based on financing theory and related theories. By comparative analysis, gab will be found and then problems occurring in financing method in listed military enterprises in our country will be traced. There are four aspects by which the analysis is made. The first one is financing order. The second one is financing method. The third one is the ratio of shareholder's equity to the sum of shareholder's equity and debt, and the last one is the gains distribution. Xi An Aircraft International Corporation is made as the case to be compared with America biggest listed military Group, Lockheed Martin, with respect to financing data aiming at demonstrating and supporting to previous content.According to the analysis result from the four aspects above, obvious differences can be found lying in preference to equity financing between listed military enterprises in our country and America. Listed military enterprises in America are inclined to bond financing while equity financing preference universally occurs in listed military enterprises in our country. This article makes an intensive study and analysis of this preference, and get the following results: a. problems occur in shareholders and management layer; b. vacancy phenomena occurs in Corporation Governance; c. securities market is imperfect, which not only put soft restrictions on cost of s equity financing, but causes cost inversion phenomena that cost of stock financing is lower than that of bond financing; d. Bond market is underdeveloped, and development has lag; e. policies and rules with respect to financing is changing.According to the above reasons, this paper proposes seven corresponding solutions: Firstly, enacting and perfecting relevant laws and regulations about finance, enhancing punishment , increasing the costs of illegality, regulating the military enterprise's financing behavior. Secondly, strengthen the regulation of the securities markets, the timely discovery and restriction could ensure the operation of securities market efficiently, in order to protect the lawful rights and interests of investors. Thirdly, changing administration appointment to marketization is helpful to establishing a market of professional managers and selection of high-caliber personnel , and this make military enterprises to pursue higher performance aim , so as to improve financing structure. Fourthly, developing the bond market, reducing the financing cost and entry threshold, enhancing the bond markets'stability and flexibility ,changing the lag of bond market could be used to raise the motivation in bond financing of our country's military enterprises. Fifthly, optimizing the corporate governance structure of the military enterprises, reducing big shareholder's stock ownership ratio could prevent big shareholders'control to military enterprises effectively. Sixthly, strengthening the supervision role of the operating administration could effectively regulate the military enterprises'financing behavior. Seventhly, perfecting the incentive-restricted mechanism for managers could make the management work for the interests of the country.