The Research On Debt Structure Of Chinese Enterprises

Since Modigliani & Miller advanced the famous MM theorem in 1958, the questions on choice of the enterprise's financing means and capital structure have entered the field of vision of mainstream economics, and become increasingly an important part in the enterprise's financial theoretical studies. It paves the way for the study of capital structure and corporation's value. Most of the studies focus on the relationship between the capital structure and the enterprises'value, and how to arrange the scale between stock and debt. Less attention was paid to the debt structure. Debt is an important source of the outer finance for enterprises. Obviously, the structure of the debt influences the value of the enterprise. Enterprises'value maximization is the basis of the thesis, the main idea of the thesis is to dig the factors which truly affect the debt structure of Chinese enterprises.The structure of debt can be classified as follows: it can be typed as guaranteed debt and non-guaranteed debt according the debt is guaranteed or not; it can be typed as long-term debt and short-term debt according the term of the debt; it can be sorted senior debt and subsidiary debt according the repay order of the debt; it can be sorted as public debt and private debt (bank loan and other financial institution loan) according to the form of issue. The paper focuses on the term and the issue form, that's the placement structure of debt and the term structure of debt.Contract theory and information asymmetry theory is used in this paper to explain debt structure. Debt is a financial contract. But contract is incompleteness in real world because of information asymmetry and transaction. The owners of capital supply different debt contract provisions to the enterprises. Whether the provisions are received influences the debt structure of the enterprises. Generally speaking, items of private debt contract is less requirement in disclosure of information and more flexible in execution of the debt contract items. The enterprises such as growing ones prefer the bank or other financial institution for debt, considering the two points. Otherwise, they will choose securities. Bankruptcy procedure which connected with law surrounding is the protection system for the creditors. Common law provides more powerful protection to the creditors. Countries with common law have developed public debt market. Enterprises in these countries finance more capital from public debt market and have more long term debt. Public debt market and private debt market have different ways to alleviate information asymmetry. In private debt market, bank can reduce information asymmetry by credit rationing, debtor classification, guarantee and long relationship keeping with debtor. Information disclosure rule and credit rating are used in public debt market.The choice of enterprises'debt structure can also be decided by its attribution, because it's the basis of manager's financial decision. Asset features, structure of stockholders and industrial characteristics are considered in this paper. Enterprises with good quality, less capital and belongs to regulated industry prefer bank loans. Enterprises with high concentration in stockholders choose public debt. Enterprises with government as the largest stockholder have tendency to borrow from bank. When managers have stocks, the placement structure of debt relies on the balance between benefit and cost brought by different financial methods. Enterprises have different debt structure because of lying in different stage of the industry and regulated or not.Besides the general factors which influence the choice of debt structure, the dissertation pays special attention to the characteristics and influential factors of Chinese enterprises'debt structure. The time window is from 1996 to 2006. Chinese enterprises have higher short-time debt and more bank loan. This state is stable in the past 11 years. But the differences among industries are obvious. Compared with developed and developing countries, the debt structure of Chinese enterprises also show higher proportion short term debt and higher proportion debt in bank loan. And the features haven't changed in the past 11 years. The reasons for Chinese enterprises'debt structure lie in deficiency of financial system, the warrant of the government and the weak protection to investors.The paper tests hypotheses. The results as follow: 1) asset attribution, repay ability can explain Chinese enterprises'placement structure of debt, but the rate and reputation of issue have less influence. 2) agency cost hypothesis, asset matching hypothesis, signal hypothesis and tax hypothesis are tested in the model. 2) Support the relationship between stockholders structure and debt structure. 3) The rate influences the term structure of debt, the term will longer with the rate increased. 4) Regulated has obvious positive influence to long term debt.Based on upon research, the thesis gives suggestions from two views at last: 1) break away from system deficiency. 2) Improve the structure of stockholders.