Overseas Ipo Timing On Capital Structure Study

The whole world competition is increasingly fierce day by day, so the mode of enterprise management is changing from "financial management" to "VBM". This reflects the focus of the management is transferring into value creation. And how the financing of debt and equity to maintain a reasonable proportion to form the optimal capital structure, thereby maximizing the value of enterprises, this is not only corporate shareholders and creditors share a common goal, but also has long been the company's financial study of the issue of most concern one.Professor Baker and Wurgler clearly proposed market timing theory on 2002, this theory clearly pointed out that corporate capital structure choice is closely related with the market value of enterprises. "Market timing" refers to the practice of issuing shares at high prices and repurchasing at low prices. They concluded that capital structure was the cumulative outcome of attempts to enter the equity market and the impact of market timing on capital structure would last at least 10 years. Concerning on this theory, domestic and foreign scholars based on different capital markets to do lots of studies, mostly agreed the existence of market timing, but there exists some disputes on the market-to-book ratio as the market timing variable and the lasting influence of market timing behavior on the capital structure.In recent years, the overseas listing of Chinese enterprises to speed up the pace, while Hong Kong capital market with its diversified investment structure and mature regulatory mechanism to attract lots of companies to list here. Hong Kong GEM market has been established for almost eight years, with 40 mainland enterprises listed here. This paper first analyzes the current research about the H-shares on the GEM, and then examined the effectiveness of market timing theory using the data of the H-shares on the GEM from November 1999 to December 2007. Positive results showed that unlike the mature capital market, market timing does not exist in the GEM H-share companies, nor has lasting influence on the capital structure. This paper then analyze the reason from the own characteristics of the GEM, because of its relatively lax listing standards and sometimes welcome the concept shares, the mainland enterprises chose the listing time not based on the market value but on the time when the policies were more favorable or with high growth prospect. As a result, the traditional theory of capital structure is still the main factors to explain the forming of Hong Kong GEM H-share company's capital structure.