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The capital structure of listed companies in China Optimization Countermeasures

Author: ZengZhen°°YangMin From: www.yourpaper.net Posted: 2009-07-04 17:17:02 Read:
Abstract: The corporate capital structure of the main factors affecting corporate governance structure. At present, China's enterprise reform is to push is reasonable capital structure will be directly related to the ability of the business in the market for long-term development. Therefore, to optimize the capital structure without delay. China's state-owned listed companies as the research object, starting from the factors that affect corporate capital structure, examine the status of its capital structure, analysis of its causes and consequences, to think and make some comments and suggestions based on the optimization of the capital structure. ™•
Keywords: listed companies; capital structure; optimization ™•

Standards and influencing factors of a modern capital structure optimization ™•

As the enterprise itself, its business goal is to maximize profits, the investors invested enterprises also aims to maximize the investment income Therefore, the optimal capital structure of the enterprise should make corporate profits, investors maximize returns. Market value as the evaluation of enterprise capital structure of the target, the implicit assumption is that the enterprise market to maximize the value and to maximize their profits unity, unity of and investor investment income maximization. But because of the change in direction of the securities market of blindness, stock prices and corporate profits are often not uniform, and in the separation of ownership as the main feature of the modern enterprise, corporate investors and operators target is not consistent. Therefore, this assumption does not hold. ™•
In addition, the market value of the enterprise by stock market value and the market value of the bonds. China's securities market is also developed, in this case, the vast majority of the market value of the enterprise is difficult to correct determination. Therefore, the market value of the enterprise as a standard of evaluation of corporate capital structure, lack of maneuverability. ™•
This can be seen, the enterprise market to maximize the value of the standard of corporate capital structure optimization, corporate capital structure optimization to maximize their profits and investors investment income should maximize the double standard unified standard. ™•
The standard view from the optimization of the capital structure, the enterprise should exist an optimal capital structure, but in reality, it is difficult to find the best structure. Capital structure optimization affected by many factors. First, the cost of capital. Optimize the capital structure of one of the fundamental purpose is to make the lowest consolidated capital and the different means of financing the cost of capital is different. Second, the financial risk. Enterprises in the pursuit of the interests of the financial leverage is bound to intensify the efforts to raise the debt to equity, corporate financial risk increases. Therefore we must fully consider how to control financial risks within business can afford. Third, the long-term stability of the business. The use of financial leverage, must be limited to within the range of not endanger its long-term and stable business. Enterprise profitability. Higher profitability liabilities capital is relatively small, because it can be more internal accumulation to solve Financing. Fifth, the structure of corporate assets. Different asset structure of the enterprise's ability to use financial leverage more real estate mortgage, less based technology development company. ™§

Capital Structure of China's state-owned listed companies situation and reason ™§

2.1 high proportion of bank loans ™•
The funding sources of the Chinese enterprises in the 1980s mainly financial gratuitous allocation Bo Gaidai after the implementation of the bank loan is the only way of corporate external financing, until the late 1980s, only the stock and corporate bond financing. Low bank lending requirements of state-owned enterprises, and later strengthened loan collateral requirements, but could not repay the enterprise, rarely the implementation of bankruptcy procedures, the bank loan enterprise soft constraints caused by the high debt ratio. ™§
2.2 high proportion of equity financing ™•
The cost of capital is the rate of return that investors willing to provide the funds after considering the current situation. Required rate of return for any investment is that investors are willing to provide funds expect to get the lowest rate of return on this investment. The lowest cost of capital of the bank loans, corporate bonds followed stock remuneration owned the highest. However, due to the long history of China's stock market, most of the time of the secondary market price in an overestimation of the state, the companies tend to equity financing as a free lunch, it costs only as required to pay the bonus. ™§
2.3 internal retained earnings ratio of small ™•
China and most developing countries internal financing ratio relative to developed countries to lower, China's enterprises in little accumulation within the period of expansion, the gearing ratio is generally high. Requires a large amount of external funding rapid expansion in the growth phase of the enterprise, the enterprise, the enterprise will be more dependent on banks and other financial institutions, and thus a higher ratio of debt financing. ™§
2.4 proportion of bond financing small ™•
Bond financing costs lower than stock, and other tax laws bond interest expensed at bedtime, bond financing can also bring tax benefits to the enterprise, so you can make the increase in after-tax profits per share. But our developmental imbalance due to the stock market and the bond market, bond market development is seriously lagging behind enterprises to issue bonds by the government limit control to enable enterprises through the small room for bond financing. ™§ 3 recommendations to optimize the capital structure of listed companies in China ™•

First of all, we see that the presence of asymmetry between the debt ratio and return on capital. A certain percentage of liabilities to corporate tax avoidance effect and constraint to motivate operators and other positive effects. But not the amount of the liabilities higher the better, and must be kept in a certain ratio range. Determine this range should consider several factors. The basic premise of the enterprises to choose a project to guarantee a profit or at least flat, which requires the expected profit margin of borrowed capital is not less than the rate of interest on borrowings. In addition, in order to borrow a certain sum, the overall capital remains profitable or at least flat, requires corporate borrowers expected profit margins greater than or equal to the weighted average cost of capital rate. ™•
Secondly, the state-owned enterprises excessive preference for equity financing. Enterprises generally believe that the issue of shares in the bank loans and the issuance of bonds, it does not require maturity debt service so you can increase profits, improve business efficiency. China's state-owned enterprises in general equity financing as the preferred way of corporate finance, tried to broaden the issued amount, and more to the allotment of dividend distribution policy. ™•
But we must see that there is no such thing as a free lunch in the world, especially on the capital market. The equity ratio is too high, will seriously affect the operational efficiency of enterprises. Claims for enterprises is a hard constraint equity constraints are relatively soft, the high proportion of equity capital structure will only lead to poor supervision of enterprise managers, business managers work hard pressure, the ultimate detriment of shareholders and creditors interests; modest liabilities operation can reduce the cost of capital, bringing the interests of the tax structure and financial leverage effect, high equity ratio obviously can not get more than the benefits. ™•
Based on the above analysis, we can see that the optimization of the capital structure of China's state-owned listed companies should be two main aspects: ™•
On the one hand, to optimize the capital structure of state-owned enterprises, the key is to change the state-owned banks and state-owned enterprises of the non-normal contact, change the state as the owner, the state-owned banks as creditors of state-owned enterprises constraint softening the status quo. Business owner should be funded of responsible corporate debt, corporate Once insolvent, the owner should not impede the creditors of the enterprise bankruptcy auction; same time, the owner of the right to control the acts of the company's liabilities, in time to stop the corporate damage the owners interests behavior. In addition, the creditors bear the risk of debt investments, to examine loan project in strict accordance with the requirements of the proportional relationship between financial risk and financial costs, adjust lending rates more than enterprises can bear the risk, creditors insist on not lend capital. Finally, the introduction of a variety of investment body within the enterprise, the establishment of a reasonable amount of debt, equity structure. ™•
On the other hand, is very unreasonable considering the shareholding structure of China's state-owned enterprises, to reduce the proportion of state-owned shares, diversified equity owners. In addition to this major shareholders of the national banking, corporate, investment funds, and the enterprise workers and the public should be included. In particular, to increase the stake of corporate investors. The same time, it should be appropriate to add the business share of equity and stock options, what percentage of the total business owner, there should be a fixed boundaries, should be associated with the enterprise scale and long-term development planning. ™§
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