Human Capital, Equity Structure, Debtcapital Structure And Corporate Performance

The rapid development of modern economy, knowledge economy in particular, has greatly expanded the content and connotation of capital. Without doubt, human capital has become a major driver of economic development. There has been a general consensus that company’s capital structure is incomplete without considering human capital. Guided by the objective to maximize corporate valuation and through active participation in the capital markets, listed IT companies in China have become the driving forces of the country’s technology industry. They have played a leading role in driving local economy and improving China’s overall economic development. Therefore, it is especially important to conduct an in-depth study of the capital structure and corporate performance of these companies.This thesis breaks the traditional theoretical framework by restructuring the concept of capital structure and integrating theories of human capital and capital structure. In the area of corporate performance evaluation, a comprehensive shareholder perspective based system using listed IT companies as the research object and factor analysis as study method is established. The system break the unity problem of the past performance evaluation system. It studies the correlation between capital structure and corporate performance using structural equation. Interactive models of human capital, ownership structure, debt structure and corporate performance are constructed and evaluated using two-stage least square method. The regression analysis of the structure equation models have been compared with those of single equations. Results are further refined to provide reliable conclusions, which provide empirical evidences to optimize capital structure and improve corporate performance of listed IT companies.The thesis starts with a comprehensive review of literatures that involves concepts and interactions of human capital, equity capital, debt capital and corporate performance. The review and related comments forms the foundation of subsequent deductive theory and empirical analysis in the latter part of the thesis.Secondly, using the listed IT companies as study subject, the thesis establishes a comprehensive evaluation system from the point of view of shareholders. This system also adopts factor analysis method to measure financial performance, forming the basis of the subsequent empirical evidence.Next, the paper systematically describes the characteristics of human capital, equity structure and debt structure using statistical model and variable design. Based on the interactive characteristics of human capital, equity structure, debt structure and corporate performance, four-way interactive simultaneous equations are established. Basic and yet to be tested assumptions are also formed from theoretical analysis.Afterwards, OSL equation is employed to conduct regression analysis, to illustrate the correlation of human capital, ownership structure, debt structure and performance of the companies. It is also used to test the significance of the simple equation of model(4-1) to model(4-4) and identify simultaneous equations which bear statistic importance. The simultaneous equations are constructed and tested based on the equations of corporate performance, human capital, equity structure and debt structure resulting from single equation testing. Using two-stage least squares method, regression analysis of the total sample are performed to study correlation of human capital, ownership structure, debt structure and the performance.Conclusion of the study shows strong correlations between level of education, wage growth, executive compensation and corporate performance. Executive compensation has strong impact on corporate performance. There is also a strong increase of influence coefficient between corporate performance and executive compensation, reflecting stronger impact of corporate performance on executive compensation. Secondly, there is an increase of negative correlation between large shareholder and corporate performance, reflecting the fact that the single equation may have underestimated negative impact of big shareholder on corporate performance. Meanwhile, impact of corporate performance on the percentage holdings of the large shareholder may also have been underestimated in the single equation model. In choosing Target Company’s performance, the largest shareholder of listed companies has a tendency to pick low value companies, which is consistent with the conclusion of equity structure theory on expected scale factors. Third, there is an inverted U-shaped relationship between the asset-liability ratio and corporate performance, which amended regression results of the single equation in Chapter five. The total debt ratio and corporate performance has a lower inflection point location. Before the inflection point, increase of corporate liabilities can lead to improved corporate performance. After the inflection point, increase of the debt ratio will decrease corporate performance. Because of the small value of financial leverage inflection point, debt ratio and corporate performance for most sample companies has negative relationship, indicating poor management and low efficiency of corporate financing of many listed IT companies.At the conclusion of the thesis, pertinent strategies and suggestions are proposed to optimize capital structure and improve corporate performance. Shortcomings of the thesis and prospects of future research are also discussed and presented.