On Capital Structure and Financing of preference of

[Abstract] l2 years on the credit of the scale, corporate bonds and equity financing data, the use of long-term moving average trend analysis and found that position of absolute dominance of the status of bank credit, followed by equity financing, and finally bond financing. come to the capital structure and financing of major changes in national policy by the markets and the impact of change.

[Paper Keywords] capital structure, financing preference, long-term trend analysis, moving average
First, the related concepts
(A) Capital Structure and Financing Preference
The capital structure refers to the enterprises of various long-term funding relationship between the composition and proportion of the general long-term funding sources, including long-term debt capital (such as corporate bonds) and equity capital (such as common stock). In many theoretical analysis, the general assumption enterprises only ordinary shares and corporate bonds to finance both the method of financing and operating capital.

Financing preference is to guide actors to choose different financing the order.

Capital structure theory, there are four, including the U.S. financial management expert David Durant (DavidDurand) ���� capital structure theory, Modi Ge Lai Ni (F. Modigliani) and Miller (M. Miller) famous MM theory, the MM-based tradeoff theory, Myers (My-ers) and Maggie Love (Majluf) (1984) the now known as the Pecking Order Theory of capital structure theory. Today the greatest impact is Optimal finance theory, which generally follows that of corporate finance internal financing, debt financing, equity financing such order.

(B) Long-term trend analysis and moving average
The so-called long-term trend is the objective of socio-economic phenomena in a continuous Development over a longer period of time trends.

Changes socio-economic Development of the phenomenon is affected by many factors, in addition to its long-term trends by factors, but also affected by seasonal factors, cyclical factors and irregular factors change. Long-term trend analysis is the use of certain methods , the trend factors other than changes in factors that influence be eliminated, so that Development and changes in socio-economic phenomena, alone, showed long-term trend, to explore the phenomenon of social and economic Development and changes in the Laws and statistical projections provide important condition. Determination of long-term trend approach, there are the moving average method and the least squares method. This article is based on data l2 Chinese companies, for example, using the moving average method, to analyze whether the capital structure of China's foreign or domestic Pecking Order Theory of the shares scholars preference theory.

Second, our analysis of capital structure
(A) data selection and processing
1. Sample selection. The statistics for all enterprises in China for statistical object. Covers listed companies and unlisted companies. Our long-term capital for the acquisition was mainly rely on bank loans, issuing bonds and stocks. And that belong to the category of external financing. As loans provided by banks listed and unlisted companies is difficult, therefore to increase the sample range.

2. Content selection. In the choice of content to the annual increment of bank credit, the amount of bond financing and equity financing amounted to object analysis of the company's capital structure. To change the past only two ordinary shares and corporate debt financing required for the financing of business financial analysis of capital structure assumptions.

3. Time frame. In the time window, in order to finance the situation of Chinese enterprises to conduct a longitudinal comparison, this time window for the selected data 1996-2007. During lasted 12 years.

4. Hypothesis: irregular change is by chance due to random factors. If from - a long period of view, all causal factors are formed by random factors will cancel each other deviations. Therefore, this paper, the moving average method thirteen moving average smoothing the data to determine the long-term trend of financing preference.

5. Source .1999-2007 credit data in accordance with the People's Bank of China, 1994-site data processing data from 1998, according to the National Bureau of site finishing. Bonds and stock data from the <"China Securities and Futures Statistical Yearbook (2OO1)> 2001-2004 data from the <"China Financial Development Report>" (Li Yang, Social Sciences Academic Press) ,2005-2007 data from the "China Financial Development Report>>, the People's Bank of China website <" China Finance Market Development Report>> and China Bond Information Network <"China annual report on the Information market bonds> order from.

6. Bank credit data on .1994 - 2007 the balance of RMB loans was 39974.77,50544.1,61516.6,74914 1,86524.1 93734.3,99371.07,112314.70,131293. 93,158996.23 177363.49,194690.39,225285.28,261690.88. turn come 1995 --- 2007 RMB credit of the incremental data is 10569.33,10972.5,13397.5, 11610,11610,11610,7210.2,5636.77,12943.63,18979.23,27702.3,18367.26,17326.9 30594.89,30594.89.

(B) Capital Structure and Financing of preference of data analysis l2
China's financial institutions issuing renminbi credit to the enterprise size, amount of corporate bond financing and equity financing amount shown in Table 2.

Table 1 shows that the order of corporate finance, loan financing first, followed by equity financing, and finally the bond financing. Totals and averages from the point of view, position of absolute dominance of bank credit, bank credit, equity financing and the proportion of bond financing is 87%, respectively, 11% and 2%. bank loans is about 6.7 times the latter two. from the growth rate, bank credit to the relative stability of debt and equity growth rate compared large stock of up to 2 times more than growth, down to at most four percent. This is largely, and then the relevant policy or market environment. For example, in November 2004, allows securities companies in China by the head of the Bank of the People's Bank short-term financing bills issued between short-term, so that the amount of bond financing in 2005 increased, China in October 2005 through the new <<Securities Act "" and "<Law> before", the main limit on the bond financing is: "Share Co., Ltd., wholly state-owned companies and two or more two or more state-owned enterprises or other state-owned investment entities set up a limited liability company. "out of the new Law, the appropriate relaxation of conditions for the issuing of corporate bonds, corporate bonds are no longer limited to the Corporation or state-owned limited liability company, although still on the public offering of the securities company's net assets, distributable profits, the cumulative total amount of such bonds to make specific provision, but the introduction of these new Laws will undoubtedly increase the issuance of bonds has a positive impact In 2007, the new species only to issue 11.2 billion yuan of corporate bonds, the stock market, the 2006 listing of ICBC and Bank of China, resulting in significantly increased corporate finance, May 2006, the recovery after the release of A shares, companies in the stock significantly speeding up the market for financing, A shares and H shares of funding was more than accounted for by higher year on year.

Links to Research Papers Download http://www.hi138.com capital structure to reflect our long-term trends and financing preferences, following application of three moving average is calculated on our data (as is true not only reflect the data nature, but also draw more objective long-term trends), see Table 3

According to Table 2, the three moving average method, by the total term loan financing and bond financing is the first down and then increased, while the stock is down first and then the trend up again. Since the data amount of the financing difference between the three too, made the chart expression is not ideal, so the moving average method in the next three are based on data to calculate their growth rate, made in Table 3, then Table 3 is based, made in Figure 1, as to determine the financing trends.



As can be seen from Table 1, loan financing and bond financing of the growth rate of roughly the same, but in the early stage of loan financing rate of rise and fall is larger than the bond financing, but in the late rise in loan financing rate significantly lower than the bond financing. This shows that the financing capacity of the bond market has been enhanced. stock growth rate is almost opposite the former two, in the late years, the growth of the three lines are the same, are rising, stock financing growth also exceeded the growth in the first two, but the last one, equity financing does not continue to grow, but declined. the three growth and change are essentially the same conclusions in Table 2.

(C) data based on 12 years of corporate capital structure and financing preference analyzed and summarized
1. External financing of corporate finance-based loans, position of absolute dominance. Derived from Table 2, 1996-2007, 12 years of data show that the proportion of bank credit was 87%, which is the total equity financing and bond financing 6 .7 times.

2. The size of bond financing has been small. This is mainly because the conditions of corporate bonds, interest rates are determined and investment direction of a planned economy with a strong color. One obvious tilt to the state-owned enterprises, the second is the management idea of corporate debt is only to corporate bonds as a funding gap of fixed asset investment, rather than from the corporate finance and capital markets in terms of financial management of species.

3. The proportion of equity financing will fluctuate with market conditions. Comparative point of view from different years, the stock market a good year, like 2000, 2005 and 2006, the high proportion of equity financing, and in a bad stock market years, such as 2001 and 2002, the proportion of equity financing to low. The results also validate the market opportunity hypothesis that companies tend to choose in the stock market is always good times for equity financing, because it can melt into more money.

4. Strong preferences for equity financing is more difficult. Due to the lack of other sources of equity refinancing, placing in a very long time refinancing of listed companies are the main mode, with the placement of the increased threshold after 2000 listed companies in China have Select additional stock of this new financing channels. For the issuance of too much, too indiscriminate, the Chinese Securities Regulatory Commission in 2002 and also enhance the conditions for issuance of new shares in 2002 and 2003, the additional application significantly reduced the number of listed companies have the additional decrease in the number of listed companies and also large amount of financing To reduce the listed company "additional hot" gradually cooling. equity financing is in large part because of the results under the guidance of national policy.

5. Financing policy environment changes with the changes of 1992 and followed after the market reform of China's economy was, as the business, financial and monetary system in depth and the establishment of capital markets, finance system has undergone major changes, corporate financing is not then the last single government-led financial or bank financing, but a competitive set consisting of a variety of sources of funding system, either indirectly through bank financing, you can also direct financing through the stock market, but also can issue bond financing. policies into a preference for the formation and evolution of corporate finance deep-rooted reasons.

Third, the conclusion
Optimal Capital popular theory is that the financing of enterprises Optimal selection order is: first internal financing, followed by bank loans, followed by the issuance of bonds and convertible bonds, and finally offering. The article on the size of the credit for 12 years , corporate bonds and equity financing of the data, using the moving average method of trend analysis-K and found that position of absolute dominance of the status of bank credit, followed by equity financing, and finally bond financing. This is different from Western capital theory, but Also different from the prevalence of domestic equity preference theory. Although this means there is a large sample, but also covers the financing of listed companies in China's basic Law. This paper argues that capital structure and financing of major changes in policy by the market and the state the impact of change.

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