TITLE:
Equity Financing Regulation and the Optimal Capital Structure: Evidence from China
AUTHORS:
Zhengwei Wang, Wuxiang Zhu
KEYWORDS:
Equity Financing Regulation; Supply-Side Effect; Capital Structure
JOURNAL NAME:
Modern Economy,
Vol.3 No.5,
September
29,
2012
ABSTRACT: The “Supply-side effect” on financial management caused by market imperfection has increasingly been concerned. During the transition period, there is strict securities regulation in China’s capital market, which brings the supply-side constraints to corporate financing. Using the data of listed companies those take secondary equity offerings between 1993-2007 in China’s A-share market, the paper examines how the change of regulation policies on SEOs affects cor-porate financing decisions. Our result shows that regulation policy is a significant factor to the amount of refinancing and the optimal capital structure. This result provides important evidence on how the equity regulation environment affects corporate financial management.