Financing Preference Of Listed Companies In China And Its Influencing Factors

Since China’s securities market established in the1990s, many scholars have done in-depth research about the financing decisions of listed companies and come to the conclusion of the equity financing preference of listed companies in China, but most of these studies had done before the split share structure reform and the explosive growth of corporate bonds. There have been tremendous changes in China’s stock and bond markets since2005. Financing methods of listed companies gradually diversified, and total financing showed a rapid growth trend. Drastic changes in the capital markets will inevitably lead to the changes of financing methods of listed companies. With the direct financing of our capital markets gradually improve and the deepening of the construction of the financing system, financing behavior of listed companies have changed, new financing preference phenomenon began to appear. In response to the changing preferences of the rapid development of the capital markets and financing behavior of listed companies since2005,this paper have tested finance preference of China’s listed companies from the two aspects of the theoretical analysis and empirical research. Following is an overview of the main content of each chapter.The first chapter is the introduction part. First of all, this section have compared the development of China’s capital market before and after2005.Pointed out that the large change of financing environment of China’s listed companies after2005, and most scholars studies of China’s listed companies presence of equity financing preference assumptions environment has changed, in the new situation, China’s listed companies still prefer equity financing is questionable. In this section we made a literature review about listed companies financing preference theory and empirical research. Firstly we analyzed empirical research of domestic scholars. By combing the domestic scholars’ research, we selected thirteen indicators, such as ROE, company’s growth, prospect of company, company size, deviation of the capital structure, Asset-liability ratio, proportion of state-owned shares, capital requirements, value of asset-backed rate, investment rate, non-debt tax shield, long-term debt ratio, which are considered affect the financing preference of listed company. Through comparative analysis, we found that Ordered-Logistic model is applicable to the problem of variable ordering, so this paper used the model to empirical research.The second chapter is about the listed company financing preferences and influencing factors. We analyzed the overall financing conditions and changes in the composition of listed companies. The analysis results show that the rapid expansion of total corporate bond financing after2005. Corporate bonds and stocks both played important roles in the direct financing. Equity financing and corporate bond financing totaled2.5trillion yuan in2010, but still small compared to the amount of indirect financing bank credit. And statistical analysis of the internal financing and external financing ratio of China’s listed companies, asset and liability structure of listed companies, listed companies equity finance structure changes. Then, we combine different financing development trend in recent years and focus on the internal features of listed companies to analyze corporate finance preference.The third chapter is the empirical analysis of listed companies financing preference. This paper selected833Shanghai and Shenzhen A-share which meet refinancing conditions, and use Ordered-logistic regression model to analyze how enterprise features, such as ROE, company’s growth, prospect of company, company size, deviation of the capital structure, Asset-liability ratio, proportion of state-owned shares, capital requirements, value of asset-backed rate, investment rate, non-debt tax shield, long-term debt ratio, impact of the financing decision. Then, according financing options regression model, respectively, we calculated predicted probability of different financing methods, probability of the occurrence represents listed company pecking order in this paper. Empirical studies have shown that listed companies have neither strong preference for equity financing, nor completely follow pecking order theory. Specific order of preference is Financing short-term borrowings priority in retained earnings financing, retained earnings financing priority issue bonds financing issue bond financing priority in the issuance of equity financing, additional equity financing priority on long-term loan facility, long-term loans financing priority Placing stock financing.The fourth chapter is conclusions, the limitations and Outlook section. This chapter first analyzed the limitations of this paper. Financing decisions of listed companies are influenced by firm characteristics, external policy environment and the development of economic, because of time and personal energy, this paper mainly analyzed financing preference from enterprise features and policy environment. At last, we propose outlook of research according to the limitations.