Study On China's Listed Companies Equity Financing Preference Based On Behavioral Finance

As the stock market developed dramatically, obviously we can witness that listed companies prefer equity financing. Meanwhile, doubts toward traditional financial theory's insufficient explanation on such preference are accumulating. Behavioral finance theory, developing in recent years, abandons strict assumptions of'rational economic agent'and'effective market'in traditional finance theory, and incorporates interest-related agents in the process of financing into a real market setting, thus strengthens the explanations on Chinese listed companies'preference toward equity financing. The studies turn out to be more practical relevant.This current paper employs qualitative-quantitative methods and conducts a comprehensive analysis on the reasons, features and serious outcomes of equity financing. Further, based on the behavioral finance theory, which grounds on psychology, behavior science, and sociology, to explore the causes of such preference from the multi-dimension of government, controlling shareholders, managerial, investors and intermediary agencies, and empirically tests managerial financing behavior through speculation. The main findings are as follows. Under the setting of market inefficiency, the transactions in the highly-noised stock market and gambling between interest-related groups, listed companies tend to re-financing by making use of irrational behaviors in the stock market, which results in a strong preference of equity financing. This preference attributed largely to irrational behavior and immatureness of Chinese stock market.