Analysis Of Imperfect Corporate Governance Structure

Because of the low financing cost, Chinese enterprises show strong preference for equity financing.

Before listing, there is a strong impulse to seek initial public offerings and successful listing. After listing, they often choose equity financing methods such as rights issue or issuance.

In contrast, enterprises are not very keen on debt financing. Even if debt financing is carried out, they are forced out of the policy to raise the threshold of equity financing or suspend the issue, and give priority to short-term loans.

This choice preference is related to the difference between the two costs.

Studies have shown that considering the factors such as dividend payment and issuance cost, the cost of equity financing in China's enterprises is only about 2.4%, which is much lower than the cost of debt financing, resulting in a strong preference for equity financing.

The cost of debt financing mainly depends on the repayment of principal and interest within the prescribed time limit, while the cost of equity financing is mainly to distribute dividends to investors. The cost of their capital is actually only an opportunity cost and does not have a mandatory binding force.

Therefore, the management of listed companies naturally regards equity financing as a long-term low-cost source of capital without debt service.

Because the financing cost is low and easy to obtain, the listed companies blindly expand the main business, change the direction of investment arbitrarily, even invest the funds in unfamiliar or unrelated fields. Some listed companies directly or indirectly invest in the stock market by raising a large amount of funds raised through issuing stocks, and the funds have not really exerting their functions, resulting in huge waste of financing funds.

Secondly, the determination of the amount of enterprise financing is often very arbitrary.

Enterprises should issue funds for investment projects, but in fact, Chinese enterprises do not decide supply according to "demand". Instead, they decide the amount of financing according to the irrational way of "supply can decide demand", that is, the upper limit of financing can be given to them according to the policy requirements, and the funds needed for investment projects are poured out. As a result, there is a strange phenomenon of virtual financing projects or poor profitability projects, and even by raising funds to repay bank loans or to deposit interest on banks.

The shareholding ratio of management in our country is generally low, and managers have few shares. Some managers have a share but often have very few shares.

In addition, due to the lagging development of the system and capital market, the application of stock option incentive measures in China's enterprises is not large, which results in huge agency costs. The interests of managers and shareholders are bound to be quite different.

Therefore, when making investment decisions, managers may pursue their own interests, such as enlargement.

To improve control power and pursue higher bonuses, but contrary to the goal of maximizing shareholders' wealth, irrational investment and even capital abuse occur.

The lack of supervision mechanism in enterprise management is often the reason why funds are used too arbitrarily.

The board of supervisors is

Organizations with indispensable structures play an important role in supervising enterprises' daily lives.

Function.

But in our country, supervisors are listed in the name of listed companies, to a large extent, in order to meet the requirements of governance structure.

Although the regulations give them greater supervision power, supervisors are in a rather awkward position. First, shareholders supervisors often come from managers or employees with relatively low shareholder level. Two, the staff representative supervisors inside the listed companies have no more say in the enterprises, and let the leading personnel supervise the daily operation of the listed companies.

For supervisors, a virtual job is the best choice.

Thirdly, managers' overconfidence is an important reason for irrational investment.

Some managers always respect other managers' opinions very much at the beginning of their business. Once the business is becoming more successful and bigger, managers will have the mentality of "self attribution". They believe that their achievements are due to their correct decisions, so they trust their abilities and judgments too much.

Overestimating their ability to make the right decisions, it is easy to analyze the various possibilities comprehensively, unable to correctly judge risks and uncertainties, and make mistakes in the company's major decisions.