A Study On Debt Maturity Structure Of Listed Companies In China

The explosion of financial crisis in Asian and the emergence of financial stress of many large groups in China make the company debt maturity structure become more and more noticeable. The ratio of short-term debt of most of China listed companies is about 86%, while that of listed companies in Finance, Germany and America is respectively 40%, 43% and 28%. So, what factors influence debt maturity structure of listed companies in China? What results does it cause? These are the key issues to be researched in the paper.There have existed some literatures about debt maturity structure in China, but the literatures have only focused on the influence of companies'themselves characteristics on debt maturity structure. They have few dealt with the influence of the business conditions and macroscopic system and the results caused by the debt maturity structure with large proportion of short-term debt. This paper has comprehensively studied what factors influencing the debt maturity structure of listed companies in China, what results caused by the large proportion of short-term debt and how to optimize the debt maturity structure. The work of this paper has theory and practice value to further theory study, policies making of monitoring institution, the financing decisions of listed companies and the crediting decisions of creditors. It has not only offered theoretic bases helping companies to make proper financial decisions, but also guidance which creditors can refer to properly estimate debtors'solvency and value and the government refer to supervise finance system stability.The frame of the paper is: first, the paper has studied what factors affecting the companies'debt maturity structure in China from three aspects of companies'themselves characteristics, business conditions and macroscopic system. Then the paper draws a conclusion based on the empirical results of the three aspects. Second, according to the study of academic literatures, the paper has researched the relationships between debt maturity structure and company value mainly from the tow aspects of default risk and investment efficiency. And the influence of debt maturity structure with dominant short-term debt on the financial system is also researched. Finally, the paper has put forward the advices to optimize the debt maturity structure of listed companies in China. The paper includes three sections of contents.The first section (the second and the third chapter): the factors influencing the company debt maturity structure in China have been studied in detail. Companies themselves characteristics, business conditions and macroscopic system all influence the debt maturity structure of listed companies in China. It is the rational for companies and creditors to choose short-term debt, which is an adaptation to macroscopic environment of non-liberalization of interest rate, underdeveloped bonds market and faulty bankruptcy law. The detailed conclusions are: (1) The companies that are larger, more profitable and have higher leverage have more long-term debt, while the companies that have more growing opportunities have less long-term debt. This matches the theoretic expectations of the agency cost hypotheses, which reflects that alleviating the agency conflict of debtors and creditors is the primary factor influencing the debt maturity structure of listed companies in China. When creditors expect the repayment of their loans cannot be adequately guaranteed under the current economic, financial and lawful system, or the debtors think borrowing long-term debt will bring too much agency cost to them, shortening debt maturity is effective means to reduce credit risk and agency cost for them. Therefore, the large proportion of short-term debt is the result of game between companies and their creditors. (2) The ratio of short-term debt is negative related with the degree of market concentration and products difference, and positive related with volatility of demand and cost of a business. The listed companies in China have not enough conditions and consciousness to use long-term to enforce competency under the current financial system, and large amount of short-term debt is used to increase liquidity. (3) The results of empirical research on the influence of interest rate, term-structure, inflation, tax and law on the debt maturity structure of listed companies in China have verified the role of the macro-environment on the companies'financing. The developed and perfect financial and law systems can promote companies to get more long-term debt funds and then optimize their debt maturity structures.The second section (the forth and the fifth chapter): in the part of the paper, the influence has been researched that debt maturity structure with dominant short-term in China has on default rate of companies, investment efficiency and China financial system stability. The paper has applied the theory of compound options to structure models, execute data simulation and then do empirical research. Finally, I have drawn the below conclusions. Given the level of the risk of companies'assets and their leverages, the relationship between the ratio of short-term debt and default rate is like U shape. That is there is the optimum debt maturity structure from the angle of shunning risk. The ratio of short-term debt of most of listed companies in China is very high, being in the right half of side of U shape. If the ratio of short-term debt is raised farther, the default probability of the companies will increase greatly, which may in turn result in more bad accounts of banks and more fragile social credit system.Then, the paper has applied claim contingent theory to structure models, execute data simulation, do empirical research and finally get the below conclusions. The relationship between the degree of non-efficiency of investment and the ratio of short-term of a company is like U shape. That is the degree of non-efficiency of investment is the lowest when the debt maturity structure is in complete balance. In addition, the relationship between debt maturity structure and investment efficiency is not simple linear, which depends on the risk level of companies'assets at a great extent. The ratio of the short-term debt of listed companies in China and the degree of non-efficiency of investment is positively related. For the company with a high risk level of assets, the high ratio of short-term debt would lead the company to over-invest, while for the company with a low risk level of assets, the high ratio of short-term debt would lead it to under-invest. So, the current debt maturity structure of listed companies in China is not sound, which increases companies'financial risk, distorts their investment behavior and lowers their value, and in turn makes financial credit fragile, reduces the efficiency of the allocation of fund and finally leads to financial crises.The third section (the sixth chapter): the paper has mainly discussed the suggestions of optimizing the debt maturity structure of listed companies in China. The authority should greatly develop the market of corporation bonds and financial leasing so as to increase the financing sources of companies; speed the reform of the liberalization of interest rate and develop the information consulting industry further to create more perfect conditions for debt pricing; strengthen the social credit system, remedy the related content of Corporation Law and Bankruptcy Law and build the escape clause of limited liability, the institutions of creditors autonomy and the institutions of protecting creditors of secondary companies; perfect the governance rules of listed companies in China and urge companies to set up the committee of debt management under directorate to improve the consciousness and ability of debt management of companies.There are some key pieces of innovation as follow in the paper:1. The paper has made the theoretical model of the relationship between the debt maturity structure and default rate and put forward the conclusion that relationship between the ratio of short-term debt and default rate is like U shape.Many of the exiting literatures have studied the relationship of debt maturity and default risk, some of which substantiate that long-term debt lead to high default risk and others prove that short-term debt does so. But in the reality, the debt of a company includes both short-term and long-term debt, so the study on the relationship between the debt maturity structure and default risk is more significant. The paper has applied the theory of compound options to structure models, done empirical research and drawn the conclusion that the relationship between the ratio of short-term debt and default rate is like U shape. That is there is the optimum debt maturity structure from the angle of shunning risk. The ratio of short-term debt of most of listed companies in China is very high, which implies great default risk.2. The paper has made the theoretical model of the relationship between the debt maturity structure and investment efficiency and pointed out their relationship relies on the assets'risk and the relationship between the degree of non-efficiency of investment and the ratio of short-term of a company is like U shape.Most of the existing literatures have studied the relationship between the leverage and the investment efficiency, but they few dealt with the relationship between the debt maturity structure and the investment efficiency. The paper has applied claim contingent theory to structure models, execute data simulation and get the below conclusions. The relationship between the degree of non-efficiency of investment and the ratio of short-term of a company is like U shape. That is the degree of non-efficiency of investment is the lowest when the debt maturity structure is in complete balance. In addition, the relationship between debt maturity structure and investment efficiency is not simple linear, which depends on the level of the risk of companies'assets at a great extent. The empirical results indicate that the ratio of the short-term debt of listed companies in China and the degree of non-efficiency of investment is positively related, which implies great investment non-efficiency of the listed companies in China.3. The empirical method is used to verify the influence of the liberalization of interest rate on companies'financing behavior.Many of scholars, officials and enterprisers have qualitatively analyzed the influence of the liberalization of interest rate on companies'financing behavior, but they have not given any quantitative analysis about it. The paper applies the covariance model to do empirical research on the changes of the leverage and the debt maturity structure of listed companies in China after the liberalization of interest rate, verifying the influence of the liberalization of interest rate.