At present, no matter whether the operating efficiency of China's enterprises is good or bad, they will choose equity financing, thus forming a situation of "allotment fever" and "increasing heat". Let's analyze this phenomenon from two aspects.

◆ The impact on the sustainable development of the enterprise

In order for a company to be sustainable, it must have a certain amount of debt. For businesses, moderate debt has the following benefits:

(1) Liabilities can enable enterprises to obtain tax-saving benefits and enjoy the dividends brought by financial leverage.

(2) Under the constraints of the debt bankruptcy mechanism, the enterprise manager can act in a standardized manner.

(3) Liabilities can solve the problem of insider control to a certain extent, reduce moral hazard, reduce agency costs, and promote better development of enterprises.

(4) Enterprises can prove to the market that their assets are in good condition through moderate liabilities, thereby increasing the market value of enterprises and reducing financing costs.

In China, because the proportion of equity financing is too high, enterprises cannot fully enjoy the tax-saving benefits brought by debt financing, the dividends brought by financial leverage and the information transmission function, so they will naturally not choose debt financing. The rapid expansion of equity capital can easily lead to the dilution of corporate equity, coupled with the low cost of equity financing, which does not need to be repaid, which can easily lead to idle funds and waste of funds.

Although the cost of equity financing is lower than that of debt financing when no or less dividends are paid, in the long run, it is difficult for companies to achieve sustainable development if investors do not receive corresponding returns in the long run. It can be seen that for listed companies, it is difficult for China's model of heavy equity financing and light debt financing to support their sustainable development.

◆ Impact on the healthy development of the stock market

The basic function of the securities market is to optimize the allocation of resources, so that those enterprises that need funds and use funds with the highest efficiency are the first to obtain limited capital resources. However, because the cost of equity financing is low, the supervision of shareholders over enterprises is weak, resulting in the stock market and equity financing becoming a place and tool for enterprises to "circle money".

Listed companies frequently obtain cheap funds through equity financing, resulting in a serious waste of capital resources and a serious weakening of the resource allocation function of the securities market. In this case, investors will be disappointed with the equity financing of the enterprise, resulting in a sharp decline in the stock market and the continuous decline of the market credit of the enterprise, making it difficult for the securities market to maintain a healthy and sustainable development.