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The Empirical Study on the Capital Structure and Performance of Companies

Author: WuDi
Tutor: JiangYingBing
School: Dongbei University of Finance
Course: Financial Management
Keywords: capital structure liability-asset ratio performance
CLC: F275
Type: Master's thesis
Year: 2010
Downloads: 456
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The capital structure issue has become a hot research and focus for more than half century. It has become hotspot subject in securities business home and abroad too. The research on the capital structure and corporate performance has been the theorists’ and practitioners’high concern. Nowadays, it is still a theme which attracted many scholars international academic eyeball. Many scholars experienced a wide range of in-depth study for several years. So Myers still calls the capital structure "puzzle"——makes people confused.By the modern theories of capital structure, we can conclude that in an effective stock market, the change of capital structure will influence the company’s performance. Foreign scholars’ research on the relationship between capital structure and company’s performance was based on the developed economic environment, a sound institutional environment, as well as a mature capital market as a starting point. Capital structure of those countries’ listed companies has testified this. The conclusion may not be suitable for the listed companies of "condition with Chinese characteristics". After the implement of GAAP and basically completed the split share structure reform environment as an opportunity, this paper is designed to find out whether the capital structure of sample companies affects their performances and the relationship between them.The research collects listed companies in Shenzhen and Shanghai Stock Exchanges after the split share structure reform as study samples. Meanwhile, annual financial data has been chosen from 2007 to 2009. Firstly it analyzed potential result between capital structure and company’s performance theoretically. Then this paper uses liability-asset ratio and interest debt ratio to describe the capital structure of sample companies; market index and financial indicators are used to describe the performance of sample companies, and introduce some leading control variable to estimate variables of company level have an impact on capital structure reasonably.Then according to modeling built, the data of 2007-2009 are used by descriptive statistics and regression analysis by SPSS software, and describe the influence on performance of debt financing. Empirical studies of listed companies show that there is a significant positive correlation between corporate performance and capital structure. Chinese listed companies are common existing stock right financing preference, and no reasonable use debt to improve the companies’performances. Debt financing can’t play its role of governance effects. At last, according to the profound analysis, this paper put forward several relevant suggestions about the corporate governance of debt, and about the optimization of capital structure of the listed company.Five parts are in the paper:Part one:introduction. The background of the study and the implication of it are introduced firstly; Secondly, the study methods and the innovation spots are elaborated.Part two:literature review and comments. The literature reviews about the relationship between capital structure and companies’ performances, and the factors which impact the capital structure are introduced briefly. Then, comment on the relevant literature, and point out the achievements and the weakness in the area, as well as the way forward.Part three:the theory foundation. Followed by the relevant concept, mainly reviewed the capital structural relevant theories and the related affect.Part four:the empirical study. Firstly, analyzing potential impact on companies’ achievement, and based on them, suppositions are put forward. Secondly, have a close introduction about the sample selection, data sources, index design and models establishment. Then, the overall research samples and the years of research samples are conducted to describe in detail. According to modeling built and correlation analysis, empirical studies on the hypothesis from overall research samples and the years of research samples. Part five:results and suggestions. To begin with, point out the consistency between the results and the suppositions, followed by the exhaustive analysis, and make profound analysis on stock right financing preference. Then, combining empirical results in this paper, I come up with some concrete countermeasures and advices from the listed company themselves to optimize the capital structure, and to improve the corporate performance of listed companies. Meanwhile, pointing out this paper’s weakness as well as the way forward.

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CLC: > Economic > Economic planning and management > Enterprise economy > Corporate Financial Management
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