【正文】 of our national economy. They thought that it just because of those systematic facts that made the listed panies’ financial activities betray to western classical financing theory. For example, the “picking order” theory claims that when enterprise need fund, they should turn to inside fund (depreciation and retained earnings) first, and then debt fund, and the last choice is equity fund. In this article, the author thinks that it is because of the specific financial environment that activates the enterprises’ such preference, and try to interpret the reasons of that preference to equity fund by bination of nonsystematic factors and western financial theories. 2. Financings cost of the listed pany and preference to equity fundAccording to western financing the theories, capital cost of equity fund is more than capital cost of debt fund, thus the enterprise should choose debt fund first, then is the turn to equity fund when it fund outside. We should understand that this conception of “capital cost” is taken into account by investors, it is somewhat opportunity cost of the investors, can also be called expected returns. It contains of riskfree rate of returns and risk rate of returns arising from the investors’ risk investment. It is different with financing cost in essence. Financing cost is the cost arising from enterprises’ financing activities and using fund, we can call it fund cost. If capital market is efficient, capital cost should equal to fund cost, that is to say, what investors gain in capital market should equal to what fund raisers pay, or the transfer of fund is inevitable. But in an inefficient capital market, the price of stock will be different from its value because of investors’ action of speculation。 they only chase capital gain and don’t want to hold the stocks in a long time and receive dividends. Thus the listed panies can gain fund with its fund cost being lower than capital cost.But in our national capital market, capital cost of equity fund is very low。 it is because of the following factors: first, the high P/E Ratio (Price Earning Ratio) of new 26 / 42issued shares. According to calculation, average P/E Ratio of Chinese listed panies’ shares is between 30 and 40, it also is maintained at 20 although drops somewhat recently. But the normal P/E Ratio should be under 20 according to experience. We can observe the P/E was only from 1874 to 1988 in US, and only 10 in Hong Kong. High P/E Ratio means high share issue price, then the capital cost of equity fund drops even given the same level of dividend. Second, low dividend policy in the listed panies, capital cost of equity fund decided by dividend payout ratio and price of per share. In China, many listed panies pay little or even no dividends to their shareholders. According to statistic data, there were 488 listed panies paid no dividend to their shareholders in 1998, percents of all listed panies, there were 590, percents in 1999, even 2022 in which China Securities Regulatory Commission issue new files to rule dividend policy of panies, there were only 699 panies which pay dividends, percents more than that in 1999, but dividend payout ratio deduce 22%. Thus capital cost of equity is very low. Third, there is no rigidity on equity fund, if the listed panies choose equity fund, they can use the fund forever and has no obligation to return this fund. Most of listed panies are controlled by Government in China, taking financing risk into account, the major stockholders prefers to equity fund. The management also prefer equity fund because its lower fund cost and needn’t to be paid off, then their position will be more stable than financing in equity fund. We can conclude from the above analysis that cost of equity fund is lower than cost of debt fund in Chinese listed panies and the listed panies prefer to such lowcost fund. 3. Types and qualities of assets in listed panies and preference to equity fundStatic Tradeoff Theory tells us, the value of enterprise with financial leverage is decided by the value of selfowned capital。 value arising from tax benefit, cost of financial embarrassment and agency cost. Cost of financial embarrassment and agency cost are negative correlative to the types and qualities of panies’ assets, if the enterprise has more intangible assets, more assets with lower quality, it will has lower liquidity and its assets have lower mortgage value. When this kind of enterprise faces to great financial risk, it will have no way to solve its questions by selling its 27 / 42assets. Furthermore, because care for the ability of turning into cash of the mortgage assets, the creditors will high the level of rate and lay additional items in financial contract to rule the debtor’s action, all of those will enhance the agency cost and deduce the panies value. Qualm is supplier of wireless data and munication service in America, it is the inventor and user of CDMA and it also occupies the technology of HDR. The market value of its share is 1120 billions dollars at the end of March, 2022, but the quantities of longterm liabilities is zero. Why? Some reasons may be that there are some petitors in the market who own analogous technologies and the management of Qualm Company takes conservative attitude in financing activities. But the most important factor may be Qualm Company owns a mass of intangible assets which will have lower convertibility and the pany’s value will decline when it has no enough money to pay for its debt. Many listed panies in China are transformed from the national enterprises. In the transformation, these listed panies take over the highquality assets of the national enterprises, but with the development of economy, some projects can not coincide with the market demand and the values of relative assets de