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Based on agency cost theory of the financing structure of listed companies in China ™§

Author: GaoYing°°CaoZhongZuo™§ From: www.yourpaper.net Posted: 2009-04-03 08:49:56 Read:
Abstract: The financing structure is the core content of the financing of listed companies, it is very necessary to study the problem of financing structure of listed companies in China from the point of view of the agency costs. The agency cost theory, equity capital and debt capital there is the problem of agency costs, the cost of financing structure depends on the responsibility of enterprises distributor, therefore, the best financing ratio is the trade-off between the agency costs of equity and debt agency costs. Obtained equity financing preference of listed companies in China conclusions by analyzing the financing structure of listed companies in China, and to explore the financing structure of listed companies in China main reason for the unreasonable. On this basis, we should vigorously develop the corporate bond market in China to speed up the split share structure reform, strengthen creditors camera control, to improve the recommendations of the shares of listed companies and the regulatory mechanism to reduce the agency costs of China's listed companies, optimize the financing structure.

Keywords: financing structure; agency costs; equity financing preference

The financing structure is a combination of different proportions of debt financing and equity financing. Debt financing, including bank loans and corporate bonds and other financing channels; equity financing, including retained profits and equity financing, and equity financing mainly refers to the stock of initial issue, allotment and issuance. The equity financing is equity financing.
Companies have chosen different ways of financing, will form a different financing structure. Corporate finance structure is an important part of the modern enterprise organizational structure theory. Modern corporate finance activities, selected by the mode of financing to maximize its market value, that is, to determine the optimal financing structure, it has been a major area of ??concern in financial theory and practice. Exploration and research in the field has formed a relatively complete theoretical system, capital structure theory. The entire capital structure theory history can be divided into two phases: the previous stage of the old capital structure theory during the latter stages of the period of new capital structure theory. The old capital structure theory can be divided into two parts of varying importance, the traditional capital structure theory and modern capital structure theory [1]. This phase began in the 1950s, and continued until the late 1970s. The entire trajectory of the study can be summarized as follows: based finance theory proposed by Modigliani and Miller, the formation of the two major schools. "Tax School" the research tax shield effect and the capital structure, the second is the study of bankruptcy costs (derived from financial distress costs) and capital structure of the relationship between the cost of bankruptcy School "or" financial distress costs school after the two University of camp Last attributed to "trade-off theory. After the late 1970s, new research methods in economics for capital structure research provides new means, in particular, the theory of asymmetric information provides a new perspective for the analysis and interpretation of the capital structure, capital structure theory gradually formed four new genre, agency costs, the signal model theory, financial contract theory and the new pecking order theory [2]. Interpretation of the corporate finance structure based on the perspective of agency costs, closer to the modern understanding of the economics of the enterprise is "a group of contract links. By agency cost theory to analyze the structure and origin of the financing of listed companies in China and the countermeasures proposed to optimize the financing structure of listed companies in China.

An analysis of the financing structure of the agency cost theory-based

The basic idea of ??the agency cost theory
Jensen and Meckling earliest use of agency cost theory to explain the structural problem for the corporate finance. Their classic paper published in 1976, the theory of the firm: managerial behavior, agency costs and ownership structure ", the definition of agency costs: agency costs, including a group contract for the design, supervision and the agent constraint conflicts of interest between must pay the cost, plus the lease enforcement costs exceed benefits caused by the residual loss "[3]. Jensen and Meckling, agency costs exist in almost all businesses.
From the perspective of agency costs, many relationships within the enterprise can be included in the scope of the agency relationship between managers and shareholders is a typical agency relationship. In the modern enterprise managers as agents of the shareholders, the mere holding of shares or shares held, it would certainly produce a deviation between the objective function and the interests of outside shareholders are often not in accordance with the interests of shareholders the goal of maximizing act The result was between managers and shareholders conflict of interest [4]. This conflict is the agency costs of equity to be the root cause. Equity Agency Cost specific performance: management will increase on-the-job consumption; implementation is not conducive to business but is conducive to investment or financing activities, in order to capture the private interests or transfer of assets of the enterprise, excessive pursuit of scale expansion and ignore the investment returns of the high and low; excessive pursuit of sound management, to abandon riskier but positive NPV investment projects [5]. Clearly, the existence of the agency costs of equity will reduce the value of the business.
There are also the principal - agent relationship between shareholders and creditors. Under normal circumstances, the shareholders of the agent is the principal creditor. The same conflict of interest due to the inconsistency of their respective interests between shareholders and creditors, debt capital agency costs. The shareholders first issue of the so-called "low-risk bonds, and then to high-risk investments, to achieve the transfer of wealth from creditors to shareholders. Creditors in advance rationally expected to shareholders funds will be invested in high-risk projects, they will direct request to increase the cost of debt capital, or add a variety of restrictive clauses in debt contracts. Such a clause added to produce the corresponding costs, the cost of debt agency costs [6].
The existence of a phenomenon can not be ignored in the case of separation of owners and managers, agency costs. How to reduce agency costs become an important issue for people to study, its core is the research and design a self-regulation mechanism to reduce the cost to overcome the economic activity in the non-efficiency. Through the use of debt, will be able to play a positive role in mobilizing managers. Increasing the proportion of debt in the capital structure of the enterprise can effectively control agency costs. Therefore, enterprises must trade-off between the agency costs of debt and equity agency costs to be borne by the distributor minimum cost. Enable enterprises to bear the cost of distributor minimum debt-to-equity ratio is optimal financing structure.

(2) Based on the financing structure of the equilibrium point of the agency cost theory
The relationship between structure and agency costs of financing is shown in Figure 1. Where E = S / (S B) means that the proportion of equity financing, S and B are the number of equity capital and debt capital number. Obviously, 0 °‹ E °‹ 1, E is larger, the more equity capital, debt capital is the less; vice versa. Aso (E) is the agency costs of equity capital, Ab (E) the agency costs of debt capital, distributor cost of At (E) = Aso (E) Ab (E). With the increase in E, the increase in the agency costs of equity capital Aso (E), the agency costs of debt capital Ab (E) decreased. The equilibrium point of the corporate finance structure distributor cost corresponding hours.
The equity ratio is too high, will seriously affect the operational efficiency, this is because the debt for the enterprise is a hard constraint, while the equity constraint is relatively soft. The high proportion of equity financing structure will only result in ineffective oversight of corporate managers, business managers motivation to work hard, the ultimate detriment of the interests of shareholders and creditors. Moderate liabilities operators can reduce the cost of capital, bringing the interests of the tax structure and financial leverage effect, while too high a proportion of equity obviously can not get the above benefits. From developed foreign capital market situation, the way of bond financing has already become the main channel of external financing, which has been foreign Practice has proved that. In the United States, the proportion of bond financing in the late 1990s external securities financing in the 1980s has greatly exceeded the ordinary and preference shares up to 80%. Therefore, whether it is from the theory and in practice, corporate finance structure of the equilibrium point E ™¨ * (<0 ™Ī 5).

Financing structure of listed companies in China

Financing structure of listed companies in China
In order to investigate the overall financing of the structural condition of the listed companies in China, we use the book value of the listed company data for research. Taken prior to 2000 companies listed for the overall sample, remove individual incomplete listed companies, and 2000 has been classified as ST and PT listed companies removed, and finally get a 723 listed companies in the overall, 2000 2004, its equity and debt financing structure and changes (see Table 1).
As can be seen from Table 1: First, equity financing proportion of China's listed companies over the years more than 50%, the proportion of equity financing has been higher than the proportion of debt financing, which deviate from the equilibrium point of the financing structure of the agency cost theory; fluctuating small changes in the financing structure of listed companies in China ,2000-2004 five years has not improved significantly, and always showed a "the light debt financing re-equity financing" feature, contrary to the order of the financing of the agency cost theory.
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