Research On The Motivation And Effect Of Preferred Stock Financing In China’s Industrial Bank

Preferred stock,as a special form of securities,has the characteristics of both equity and creditor’s rights.It has been developed more mature in the west and is an important financing means in the capital market,it has been widely used in various fields of the society.In contrast,the development of preferred stock in China is very slow.Until 2013-2014,the State Council issued a series of documents on the pilot work of preferred stock,which gave policy guidelines to the method of issuing preferred stock and opened a new chapter of formal development in China,however,from the issue of preferred stock in China,the current issue of preferred stock has a high threshold,limited number of companies,in all aspects are not mature enough.As an important financing tool,preferred stock has a large application space and bright development prospect in China in the future.Therefore,it is very important for the healthy development of preferred stock in our country to make clear the motivation and effect of preferred stock financing in the form of case analysis.In case selection,commercial banks and other financial institutions are the main issuers of preferred stock financing in China,while China’s Industrial Bank(CIB)is the first pilot bank to issue preferred stock,and has conducted three times of preferred stock financing in recent years,using preferred stock financing frequency is high,the financing volume is big,belongs to the quite typical case.Therefore,this paper chooses CIB ’s preferred stock financing to carry on the discon,thorough analysis its preferred stock issuance motive and the effect.Based on the relevant research results of domestic and foreign literatures on preferred stock,the background,process and main terms of the issue of preferred stock,combined with the operating conditions of CIB,this paper probes into the motivation and effect of issuing preferred stock by CIB.The study finds that,firstly,the motivations of issuing preferred shares by CIB include the restoration and selection of shareholders’ rights,meeting the needs of capital supervision and development,continuously optimizing the capital structure of the company,and promoting the policy and economic environment.Secondly,through the analysis of selected indicators combined with event study,it is found that preferred stock can effectively replenish capital,optimize capital structure,reduce financing cost,and help banks to maintain good profitability and asset quality,the announcement of the preferred stock proposal will also have a positive impact on the market reaction.Finally,from the three perspectives of issuance,investment and supervision,this paper puts forward some feasible suggestions on issuing preferred stock.The research results of this paper show the motivation,the actual financial effect and the market effect of the issue of the preferred stock by the CIB,which can provide reference for the healthy development of the preferred stock financing of CIB and help the construction of the domestic preferred stock system,it can also provide experience for more domestic enterprises to issue preferred stock financing.