On The Capital Structure Of China's Listed Companies

The theory of corporate capital structure is the core of modern finance theory. From the beginning of 1950s' capital structure hypothesis to the birth of the MM theory, and to the dispute which lasted for a long time, the west researchers made some thorough studies on capital structure. They have discussed the relaxation of MM assumptions since its establishment in 1958, and their efforts make more and more practical sense and constitute the innovation of theory in different level, such as agency cost model, interest conflict between shareholder and manager, interest conflict between shareholder and creditor, asymmetric information model, the mutual effect between product market and factor market, the points on the corporate control rights, etc. All of these researches further the development of corporate finance theory, so do the modern finance theory.China's stock market was set up in a special time, there is a series of special issuing systems and exchange systems which makes remarkable difference between China's listed company's capital structure and the West's, the difference is as fallows: firstly, concerning with the financing structure, and comparing with the developed countries' corporations, China's listed companies have little internal capital, which excessively depend on outside capital, and in the course of outside financing, they also excessively depends on equity financing, while they have little debt financing, it means that they have obvious preference of equity financing; secondly, thinking about the equity structure of China's listed companies, the problem of splitting equity is serious, there are only 1/3 liquid shares in China's stock market, whilethere are 2/3 un-liquid shares, the state-owned un-liquid shares are half of all shares, while they are more than 7/10 of all un-liquid shares, the splitting equity system makes serious imbalance interests between the liquid shareholders and the un-liquid shareholders, and makes them a sharp conflict in interest; thirdly, with regard to corporate governance efficiency, there are common problems of confuse corporate governance structure and low efficiency in China's listed companies. All of these problems make negative influence hinder the improvement of corporate governance and corporate value in China's listed companies, and bar the way of reform and development in China's stock market.China's stock market will go through three main stages: the originate stage, the marketable stage and the internationalization stage, among these stages, there are two transitional stages, that is the development from the originate stage to the marketable stage, and the development from the marketable stage to the internationalization stage. The final aim of China's stock market is to set up an advance market, which has a perfect and health system, accords with international practice and integrates with the international capital market, and is favorable to worldwide investors taking part in, and it will undergo a long time to finish the aim. The marketable stage is a key phase in the development of China's stock market, the fundamental task of this stage is to set up an efficient and united stock market, which has open information, high efficiency, rational structure, perfect mechanism, healthy function, and safe dealing system, meanwhile the stock market has a basic role in resource distribution, and meets demand of enterprises and investors. At present, China's stock market is in the transitional stage, which is developing from the originate stage to the marketable stage, the fundamental task of this stage is to eliminate all system barriers which obstructs the realization of marketable stage. China's stock market was set up in a special time, because the reform and the system design is not perfect in the early time, there are lots of deep problems and structure contradictions which restrict the function of the stock market. The problem of capital structure is one of the most important problems in China's stock market, which blocks the realization of the marketable stage, and must be resolved properly.There are seven chapters in this article. The first chapter serves as an introduction, this chapter has reviewed and commented on the theories of capital structure, it is formed by the capital structure theories of the Marxism, the West economists and the Chinese economists.Then the second chapter analyzes the fundamental theory of capital structure, it has probed into the definition of capital structure, the theory of optimal capital structure, the optimal financing structure and the effect factor of capital structure. On the basis of these theories, it puts forward a positive analysis of the effect factors of China's listed companies' capital structure.The third chapter mainly discusses the financing model and the capital structure of China's listed companies. It has inquired into the effect of capital cost upon the corporate financing decision, and compared the West corporate financing model and capital structure with China's corporations. After analyzing China's listed companies' financing models and capital structures, this part explains the institutional factors of equity financing preference in China.The forth chapter studies the ownership structure of China's listed companies. Based on ownership structure theory, it analyzes the ownership structure, the price mechanism and the shareholders' confiiction in China. Through the practical test of liquidity and efficiency of China's listed companies, it proves that the splitting ownership structure has certain negative effect on China's listed companies.The fifth chapter researches the debt structure of China's listed companies. Aifter stating the situation and the problem of the debt structure, it gives advice on how to set up and develop bond exchange market, and how to protect creditors profit.The sixth chapter implores the relationship between the capital structure and the corporate governance of China's listed companies. On the basis of conclusion of capital structure theory and corporate governance theory, it analyzes the relationship in ownership structure, game balance of stakeholders, and management performance of businesses, and then it gives a practical test of capital structure and management efficiency of China's companies.The seventh chapter probes into the problem of the splitting ownership structure. After describing the basic situation of the splitting ownership, it sums up the main points. Using the basic theory of institutional economics, it analyzes that the structure of splitting ownership has a high-cost and a low-efficiency. It's the bounded rationality that produces the structure of splitting ownership, and this problem should be solved gradually through the stock market system innovation.