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Debt Structure and Operating Performance

Author: YangJingJing
Tutor: YuHaiZong
School: Southwestern University of Finance and Economics
Course: Accounting
Keywords: Debt Structure Operating Performance Interest-bearing Debt Rate Non-interest-bearing Debt Rate
CLC: F832.5
Type: Master's thesis
Year: 2008
Downloads: 468
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Abstract

MM theory as the core theory of modern capital structure has a tremendous impact on the research of capital structure during the past 50 years. Based on the MM theoretical research, with the development of agent theory, Signal Transmission Theory, Pecking Order Theory, Control Theory, the theory of capital structure research has up the new stage. The central idea of these theories is the optimal capital structure, which have been verified in the practice of developed countries, can be a great guidence on the reseach of capital structure for China’s listed companies. The practical sense of this paper is: China from the Planned Economy to the Market Economy in transition time is so short that it is far from perfect, so connecting the actual situation of China’s capital market with the capital structure theory will tell some discrepancy from that of developed countries.The real estate industry is the industry with a large debt scale, the operation of China’s real estate enterprises have strong dependence on the debt funds, it can be said that China’s real estate industry survived on the debt. Especially, in the recent years, the real estate industry is hot, the loan of real estate is increasing sharply, and the funds from bank are 70% of the real estate’s funds chain. Meanwhile, our country has promulgated a series of regulatory policy to settle these structural problems such as real estate investment increased too high and the prices rose too fast etc. What is the proportion of the interest-bearing debt from bank’s loan and the non-interest-bearing debt from account payable in the debt of the real estate enterprises? How is it effect the value of real estate enterprises? How to optimize the debt structure? All of these problems make the paper’s research has practical significance.This paper discusses in accordance with idea that: theoretical research - empirical test - suggestions. The thesis includes five chapters:Chapter I is the introduction which firstly introduce every theory on the capital structure, this part is the theoretical basis, the real estate as the hot topic makes the paper’research has practical significance; Secondly, this part generally introduces the research idea and logical framework; thirdly, it tells us the study methods and data sources; finally, it presents the main contributions and some deficits.Chapter II describes the modern capital structure theory. Firstly, deficits the concept of capital structure; secondly, briefly introduces the history of capital structure theory; finally, analyzes the advantages and disadvantages of the theory development.Chapter III analyzes the real estate companies’situation and characteristics. Firstly, this part introduces some basic information, including the definition of its scope, industry conditions, as well as their operating characteristics. And then it analyzes the characteristics of debt structure in the listed real estate companies, uses the method of descriptive statistics to compare with the data of listed company in other industries, and, accordingly analyzes the finance characteristics of the listed companies, and then brings this paper’s key point:the concept of interest-bearing \non-interest bearing debt structure.Chapter IV empirically analyzes the relevance between the debt structure and operating performance. Firstly, it makes a brief literature review on the relationship between capital structure and performance; secondly, in empirical analysis process, the authors put forward assumptions according to the situation of China’s capital market and real estate industry’s characteristics:①Real estate listed companies interest-bearing debt rate correlated with the operating performance negatively.②Real estate listed companies non-interest bearing liabilities rate and operating performance are related. Then, from two angles of the cross-section data and panel data ,we build the model, the property listed company debt structure and operating performance of the relevance of empirical analysis, the article found two assumptions are established。Finally, analysis the results of economic significance。Chapter V is the debt structure defects of real estate listed company and the optimization suggestions. Including: strengthen the management of non-interest bearing debt, enhance the regulating mechanism of the debt finance, vigorously develop other means of finance, as well as optimize the other governance mechanisms. The author thought that the main contributions of the empirical study in this paper lies:1. On the research of the capital structure, more researches are on the impact of capital structure; there are little studies on the debt structure. This paper studies from another angle of the debt structure, that is, study from whether interest-bearing debt or not, it has certain degree of innovation.2. This paper selects the real estate industry to be studied, that is because of avoiding the impacts from different industries. In recent years the real estate industry is concerned about by the government, society and the people, so it is more practically significant to study the capital structure on the real estate industry. Meanwhile, the development of the capital market determines the impact of data’s timeliness on the results. This paper selects the indicators of recently three years so that the result is closer to reality.3. The paper calculates the annual numerical value and mean value through the Time Series Data, makes the model through the cross-sectional data, and estimates model through the WLS method. This paper analyzes the relationship between capital structure and performance, taking the 2004-2006 year financial information from 53 real estate listed companies as samples.However, as the author’s capacity and time are limited, there are some deficits in this paper:1. Since there are some difficulties to look for relevant materials and data, the author can not to make a subdivision on the bank’s loan, thereby can not give a proposal that can not only reduce the bank’s bad loan losses but also ensure the healthy development of real estate enterprises. The author believes that there is still research value in this field.2. In this paper, the predictive ability of debt structure and operating performance’statistics expression is limited, it is also necessary to be continuously verified and amended in the practice.3. The lack of statistical knowledge makes the approach in the empirical analysis of this paper is quite superficial, which may affect the accuracy of the result. 4. Due to limited time and energy, we cannot obtain data comprehensively and the choice of indicators may not be accurate, which make the results lake of strong representation.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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