Analysis On Financial Leverage Effect Of Zhongyuan Expressway Preferred Stock Financing

Since March 21 2014,when China Securities Regulatory Commission issued the Measures for the Administration of the Pilot Program of Preferred Shares,many listed companies in Chinese A stock market have successively issued preferred shares for financing.It is true that the preferred stock financing will produce financial leverage effect.However,the effect could be either positive or negative due to financing method.And it cannot be reasonably reflected from the change of the traditional indexes of degree of financial leverage.Thus,which indicators should be chosen to measure the impact of preferred stock financing on the company's financial leverage effect,and how it will effect the financial leverage effect,plus whether it is suitable for the listed companies in Chinese A stock market,,all above are worth studying.Based on the knowladges of scholars domestic and abroad in this field,,this paper selects indexes as asset-liability ratio,net financial leverage,degree of financial leverage,revenue ratio coefficient and leverage contribution rate to analyze their impacts on preferred stock financing.And further verify the impact of preferred stock financing on financial leverage effect through comparing the changes of indicators before and after preferred stock financing with the data of Henan Zhongyuan Expressway Co.,Ltd.from 2014 to 2017.The main conclusions of this paper are: Compared with degree of financial leverage,these two indicators as Income Ratio Coefficient and Leverage Contribution Ratio can better reflect the financial leverage effect of preferred stock financing;The influence of preferred stock financing on the financial leverage effect mainly depends on the net interest rate of the company's assets(or net operating assets)and the dividend rate of preferred stock.The preferred stock financing of Zhongyuan Expressway Company has produced obvious negative financial leverage effect.The preferred stock financing method is not a wise choice for every listed company.The company should consider its profit level and capital structure to determine whether to adopt the preferred stock financing method and how to reasonably design the issuance plan.