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  • Research Article
  • Open Access

Non-circulating equity and excessive equity financing

Frontiers of Business Research in ChinaSelected Publications from Chinese Universities1:25


    In the Chinese stock market, the price of exchangeable stock is determined by the discounted future uncertain cash flow, while the price of non-circulating stock depends on per book value. In general, because investors holding non-circulating equity maintain the control power, corporate finance and investment decisions reflect their interests. The pricing mechanism of non-circulating stock violates the basic pricing principle of the capital market. Therefore, corporate finance decisions deviate from the NPV (net present value). As a result, excessive equity financing problems would occur in the listed companies.


    • non-circulating equity
    • excessive equity financing
    • net present value
    • Chinese stock market