On Capital Structure Strategy

This paper, through the research of the capital structure theory, studies the practical problems of the enterprise's capital structure in China from the angles of property right economics, agent-principle economics and financial management. The target of the enterprise's capital structure is the starting-point in studying the problem of the capital structure, and it is also the end point in estimating it. The enterprise's capital structure strategy is the subsystem of the financial management strategy in a company. The definition of its target is subordinate to the definition of the target of corporate finance. The paper shows that the maximization of business value is the best target of the enterprise's capital structure. The capital structure theory has been an independent problem in the finance field since 1950 in the Western country. So the research in the capital structure theory of the Western country and grasping the different ideological system of it are the bases in studying capital structure in China. In this paper~, the author introduces and estimates the main capital structure theory in Western country, including Mlvi theory, Trade-off theory, Asymmetric information theory, Agent cost theory and Finance theory, etc. The liability finance strategy is an important component of the strategy of the enterprise's capital structure. This paper shows that the enterprise have the motive of using liability in the following cases: to gain the benefit of finance leverage; to reduce the total agent cost; to supple the insufficiency of short term capital; to play the role which made by short term liability that the manager must make an efficiency and prevent the manager from infinitely investing and expanding and show the financial signals to financial information users ; to use liability in the enterprise controlling; to use liability to satist~?the leverage purchasing ;use ability to gain the benefit of tax saving ;to reduce the total cost ;to show the good signals of the development of the entity; to adjust the capital structure. And this paper investigates the premise of using the liability correctly in differential motives. This paper investigates the impact of finance leverage on the enterprise's book value, the shareholder's equity and the EPS, discusses the relationship between the operating profit and the bearing of liability. It also investigates the asset's influence affects the bearing of liability, analyses the equity capital's insurance function on liability, the function of long term liability such as long-term mortgage bond, exchangeable bond and finance lease. This paper investigates the estimation of finance failure, the alleviating measure and the agent relation in the finance failure. The author considers the finance strategy about hoe to decide the liability's structure. The essence of the enterprise's capital structure is the relationship of the allocation of property. This paper discussed not only the pattern by which the capital structure impacts on the enterprise's value but also the rights and the interests which the shareholders, the operators, the employees enjoy and the risk they undertake. This paper denied the viewpoint that the labor-force owns the property rights if they don't invest capital into the enterprise. And the author advocates that the beneficial relationship of the owners, the creditors, the operators and the employees in the enterprise can be effectively decided by using the framework of the enterprise's agent relationship. The author also shows the size of owner equity has strategic significance...