Research On The Motivation And Influence Of Chenming Paper’s Issuance Of Preferred Stock

Preferred stocks are hybrid securities between common stocks and bonds.They also have certain characteristics of claims and equity,and they have good financing flexibility.Preferred stocks are already mature securities in the overseas market.Western countries have issued priority stocks for hundreds of years,and China’s preferred stock financing has been restricted by various factors and started late.In 2014,the China Securities Regulatory Commission issued the “Guidelines for Information Disclosure of Preference Shares of Listed Companies” and the “Administrative Measures for Pilot Projects of Preferred Stocks”,marking the beginning of a formal journey for the pilot work of preferred stocks.Based on the existing research,this paper uses Chenming Paper to issue preferred stocks as a case study.First of all,this paper sorts out the relevant situation of Chenming Paper Company and its paper industry,including company profile,shareholders and the company’s operation before the issuance of preferred shares.Secondly,based on the current situation of paper industry and the company’s own situation,the background of preferred stock issuance.The important terms and conditions,the issuance process,the results,and the financing purposes were introduced.Then,the motives for the issuance of preferred stocks by Chenming Paper were analyzed in detail.Finally,the financial effects and market effects were used to test the financing effects.Relevant conclusions and implications.Through the case study of Chenming Paper,it is found that in addition to meeting the needs of its own development funds,the preferred stocks promote the strategic transformation of the company;ease the excessive pressure on debt financing,reduce financial risks;expand financing channels to achieve diversification of financing;promote the reform of equity of state-owned enterprises,and enhance In addition to corporate governance capabilities,it is also possible to increase the value of capital market investments in the short term.In addition,it was found that the issue of preferred stock in this case not only did not dilute the profit distribution of ordinary shareholders,but also improved the profitability of ordinary shareholders after the company’s transformation.However,this paper also points out that Chenming Paper will now also consider the cash flow risk brought about by redemption of preferred stocks and the 2% interest increase in the sixth year of non-redeem preferred stocks,which may result in conflicts of interest between common stocks and preferred stocks..After analyzing the case of Chenming Paper’s preferred stocks,this paper has the following enlightenment: Based on the actual situation of the enterprise,it should prepare appropriate preference stock issuance plans for enterprises to effectively resist the problem of insufficient cash flow in the future;The relationship between preferred stockholders,especially the balance of interests between the two;the issue of preferred stocks should choose the right time;after financing,it is necessary to improve the governance capacity of enterprises and improve the efficiency of capital management.