Analysis on the reason why does the listed company prefer equity financing in our country

Abstract

Different from cost of financing, Cost of capital reflects the right Corporate Governance mechanism and the respect to the reward of risk of capital. But cost of capital is always confused with cost of financing in theory in China. If we take cost of financing as the discount rate in investment decision-making, it will lead to excessive investment and waste of capital, if we take it into the financing decision-making ,it will cause the financing order quite different from that of western company , also it will cut off the relation between financing theory and investment theory[1]. © 2012 Springer-Verlag GmbH Berlin Heidelberg.