Study On The Issue Strategies Of Preferred Stock In China

Preferred stock has three features:steady dividend, stock financing and no voting power. Steady dividend can attract institutional investors and individual investors who like stable return.It can satisfy the demands of bank depositors and retail private investors in China. Preferred stock is suitable for funds which impact the live of general people such as social insurance fund. Stock financing can drop the debt ratio of corporations and relieve the pressure to repay loans. The owner of the corporation or the majority shareholders will not worry about diluting on voting rights by issuing preferred stock to financing. But the revival of voting right about preferred stock threatens the majority shareholders like a time bomb. So they will be conscientious and do their best to make the company successfully develop. Even if such advantages, preferred stock has not been used fully with the rapid development of Chinese stock market for over thirty years. Now CHINA SECURITIES REGULATORY COMMISSION and other relevant departments make great efforts to speed up the launch of preferred stock system. Certainly it will benefit well for corporations in China.The article is aim to the study on strategy issuing preferred stock, including four sections. The first section is about the history of preferred stock in China and other countries, demonstrates the research purpose and meaning and reviews the previous research. The second section involves preferred stock concept, system and cases. The concept is introduced in detail from the definition, advantages, characteristics and classifications. While preferred stock system is elaborated by the examples of the preferred stock system of America and Chinese Opinions on Regulating Joint-stock Company. The third section is about opportunities and challenges to issue preferred stock for the companies. Positive national policy, low return in A stock market, negative interest rate, conservative investors’demand for stable income, and so on. How about the challenges? Distrust of investors, sustainable profitability, lack of criteria for selecting financing ways, opposition of large shareholder. When investors decide which one preferred stock will be the investment objective, they will consider about consider about the industry classification, industry status, financial index and the helm of the company, and so on. The section four is the core of this paper on the base of the research above when suggesting the strategies including the research of necessity about the issuance of preferred stock, choosing of Issue methods, pricing of preferred stock, and the future design. However, the paper is not perfect for less comprehensive and thoughtful thinking on the literature review and proposed strategy, but will be improved in the following research.