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Comparative analysis of the Sino-US listed companies financing options

Author: YangSunLei From: www.yourpaper.net Posted: 2009-12-08 14:45:30 Read:
[Abstract] Firstly, choose the status quo of Sino-US listed companies financing analysis found that the choice of the financing of listed companies in China against the "pecking theory, choose that way with the financing of listed companies in the United States, the decline of the equity financing and The rise of the debt financing not conform. Followed by Western finance theory demonstrates the shortcomings of China's listed companies financing options. In view of this situation, I made a few suggestions for improvement.
[Keywords] equity financing bond financing pecking theory

First, the financing of listed companies in China and the United States to choose the status quo

(A) financing of U.S. listed companies choose the status quo
According to the information source of financing and external financing in the 1970-1985 accounted for 67% and 33% of the total corporate finance, which accounted for 2.1% of the external financing of equity financing. Since 1984, the majority of companies in the United States basically stopped stock financing, and issuance of bonds repurchased shares. January to November 2000, the United States listed a total of 1592 to issue bonds, raising $ 935 billion over the same period only 199 listed companies issuing shares, raising $ 146 billion debt financing for equity financing of 6.4 times.
(B) financing of Chinese listed companies to choose the status quo
According to the listed companies in 1999 to increase the proportion of long-term sources of funds, listed companies in internal funds (retained earnings) to 17.76 billion yuan, accounting for 41.2% of the long-term funding increases; Long-term liabilities of 26.7 billion yuan, accounting for 6.2% of the amount of the increase in long-term funds, mainly long-term loans and a variety of accounts payable, and no company to issue corporate bonds; equity financing to 22.72 billion yuan, accounting for 52.6% of the increase in long-term funds. Seen, the financing channels for China's listed companies mainly rely on equity financing, the financing for equity financing in order - retained earnings - liabilities financing.

Sino-US listed companies financing options comparative analysis

(A) financing of U.S. listed companies choose to fully comply with Western financing order theory (ie pecking theory)
"Pecking theory: first, the endogenous financing does not require external payment interest not finance charges occurred, makes the the endogenous financing cost is much lower than the external financing, but also avoids the problem of the financing of ordinary shares ownership dilution . Therefore, it is the preferred way of financing for Western companies. Second, the equity financing will bring the dilution of ownership. When the "bottleneck" enterprise funds, need external financing, equity financing, due to the increase in the number of ordinary shares will cause decline in earnings per share and the market price per share. The same time, the new equity provided by the new shareholders will reduce the share of the old shareholders in corporate assets, which may lead to the existing shareholders of the control changed hands. Rarely more than 25% stake of the largest shareholder of Western countries, such as GM's controlling shareholder equity of less than 10%, Dinis is only about 5%. Third, the high cost of equity financing. Fourth, signaling and asymmetric information. The exogenous financing convey signal of changes in future cash flows of the company. There is information asymmetry between the shareholders and the company, if the company and the controlling shareholders know that the company is overvalued, want someone to share future losses fell; contrary not want someone to share the benefits of price rise. Information to pass the value of the company is overvalued equity financing, often causing the share price fell. Equity financing is the the a subsequent financing worst choice, Western companies generally ranked in the final order of the optional financing gold.
(B) financing of listed companies in China against the "pecking theory
Listed companies in China-based financing to equity financing, the financing order equity financing - retained earnings - liabilities financing. This is not only the previously mentioned "pecking theory" contrary to choose that way with the financing of listed companies in the United States, the decline of equity financing and debt financing for the rise is not relative to conform.
(C) the financing of listed companies in China to select the analysis
A balanced development of the capital market, compared with the stock market, the bond market is relatively weak
In recent years, China's corporate bond issuance was a shrinking trend, the 2001 corporate bond issue of $ 147 million, roughly equivalent to 1/8 of the stock issuance, only 1% of the new financing full social enterprise. Statistics show that, as China's capital market is the most active and important participant in the listed companies, the degree of participation in the corporate bond market is very low: in 1997, a very small listed companies to issue corporate bonds, issued in 1998, 14.79 billion yuan enterprise bonds, only less than 2% is issued by listed companies. From the secondary market, the gap between the bond market and the stock market is more pronounced. Compared with mature capital market, the size of the bond financing is obviously too small. The rapid growth of the scale and proportion of equity financing, the objective is to vigorously develop the stock market, a large number of listed companies increased results.
Speculative market is too strong, the management of the Company will not be hard constraints of the shareholders, are often faced with the pressure of the dividend payout
China's stock market still exists the phenomenon of of serious related party transactions, large organizations market manipulation, vicious speculation, resulting in market volatility is too big, too strong speculative. Large retail or institutional, personal, often reported to "gamble" psychology of short-term speculation. Six years between 1993-1998, the average turnover of the stock market in China reached 437% over the same period in New York, Tokyo, London, Korea, Hong Kong stock market in this period the average turnover rate of 59%, 29%, 152 %, 56%. In such a market full of strong speculative atmosphere, price and value of the listed companies deviate, the stock price is no longer the company's operating results for the benchmark. Standard assessment of business conditions and stock prices and the stock price gross international practice completely unreasonable, the inferior company stock even higher than the blue chip stocks, anomalies ST stocks were sought after. This is exacerbated by China's listed companies re equity financing, the light bond financing. 3. Managers of listed companies are unwilling to bear the risk of debt default and corporate bankruptcies
Western capital structure theory is that the value of the manager's individual utility depends on his manager jobs, which depends on the survival of the enterprise. The reason is that the enterprise goes bankrupt, the manager will lose benefits enjoyed by managers serving. If debt financing company bankruptcy risk and leverage the relationship is showed a positive correlation, while the manager's remuneration includes income of monetary and non-monetary income (control over income), the ruin probability increases, then the manager of the non-monetary income will be reduced; On the other hand, debt financing, debt service, and it may make the "free cash" exhaustion. Control over revenue (non-monetary income) accounted for the major part of the manager earnings of listed companies in China, and therefore managers prefer equity financing. Visible in a listed company, the manager of the more do not want to bear the investment risk, the more preferences in an equity financing.

Third, the choice of financing for China's listed companies, the author of several suggestions

(A) accelerate the cultivation and development of the capital market
In the improvement and development of the stock market at the same time, we have to speed up the pace of nurturing the development of the bond market, for listed companies to actively participate in the debt financing. Corporate bonds to meet the the reasonable financing needs of the majority of the company is inevitable to develop in depth the requirements of the reform of China's financial system as an outstanding business representatives of listed companies, and actively involved in the corporate bond market, advancing regulatory reform corporate bonds, is bound to give full play to China the function of corporate bonds to generate a comprehensive, positive and far-reaching impact. Therefore, by strengthening the construction of the corporate bond market, there is conducive to the promotion of listed companies to participate in bond financing, to change the phenomenon of over-reliance on equity financing.
(B) enterprises should change the misconceptions of equity financing, to improve their level of financial management
Enterprises should recognize, is just too much to rely on equity financing enterprises are unable to meet the high demand for capital, especially for enterprises is in a growing and high-tech industries, liabilities the operating can say is one of the modern enterprise important and obvious feature. And sensible investor behavior gradually, over-dependence on equity financing will be impossible, enterprises should make full use of the various financing methods and the appropriate mix to form the optimal or optimal capital structure. Determine the optimal capital structure of the substance of the two is the use of debt capital, reasonably determine the proportion of liabilities in the enterprise funds.
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