Institution And Market: Research On The Mechanism Of Formation Of Capital Structure

Capital Structure Theory is the most important one among financial theories. The purpose of Western Capital Structure Theory is to theoretically explain the main cause for firms to choose a particular capital structure, and to provide theoretic basis and guide for companies' decision about investment and financing. Economists try to explain the causes and mechanism of enterprises' selection of capital structure. Accordingly various schools of capital structure theory appear. These theories, however, encounter some unexplainable problems while trying to amount for some particular enterprises.1. How come Western Capital Structure Theory is not applicable to general issues? How come Western Capital Structure Theory that can account for enterprises' capital structure of one country can not do so of another country? What is the difference of the internal financing impulses in different countries? Do there exist some factors about macrocode that diversify enterprisers' financing impulses in different countries? Whether it is acceptable that those code-related factors are the internal variables that determine enterprises' capital structure?2. How come Western Capital Structure Theory lacks permanent explanation? How come Western Capital structure Theory that can account for enterprise's capital structure in one period can not do so in another period, and thus new theories are required? Whether the changes of law and institution lead to the changes of the internal impulses of enterprises' capital structure, and the fact shows that those law-related factors are the internal variables that determine enterprises' capital structure?3. A once popular notion that differ "Bank oriented system" from "Market oriented system" once enplaned the difference between the enterprises' capital structure and corporate governance in Japan and Germany and those in U.K. and U.S.. Since then, the issue at hand is how to explain the low debt of enterprises in France where both bank system and market system are immature and the high debt of enterprises in Japan where both bank system and financial market system are mature, and how to explain a phenomenon that the enterprises' capital structures and supervisory mechanisms in different countries become more and more alike. Moreover, whether there exists a law-related factor that is more general than financial system is, and that plays a guided or decisive role upon financial system itself, upon enterprises' capital structure and upon supervisory mechanism?4. What is the causal mechanism of the high debt of enterprises in China? What is the function of government's macro policies and rules? What is the result of government's policies such as "capital structure optimizing ? By what means the government should establish an external setting of law and institution in which enterprises can optimize their capital structure?5. How can the financial behavior and corporate governance of the publicly listed firms in China differ so much from those in western countries, and what is the internal impulse of the difference. For what reasons do the publicly listed firms in China unlimitedly finance investors' equity, and then not pay investors the gains their deserve.HIWhat kind of setting of law and institution, in which different firms can justly carry out their games of market, should be established?The western Capital Structure Theory, which originate from American economy background, can neither account for the status quo enterprises' capital structure in developing countries, nor explain those in developed countries whose economies are relatively on the same level. The belief in this article is that the main reason for the narrow explanation of the traditional theory is that it assumed a framework of law and institution and a conditioned investing and financing setting. The factors of macro law and institution on the one hand determine a enterprise's investing and financing setting because it protects investors to different extent, and on the other hand influence a enterprise's corporate...