Research On The Capital Structure Of China Listing Company

Corporate capital structure is one of the most important topic in cooperate finance. Western economists have provided much theoretic and empirical evidence on how foreign firms choose their capital structures. However, whether these general evidence and conclusion can still hold under China’s capital market is the first question that this paper aims to solve for.Though China’s capital market has experienced dramatic progress for the last two decades, it still has great variations compared with the requirements for national economic and social development ,foreign developed capital markets and some emerging markets. From the development trend of China’s capital market, we can see the general regulation environment is getting improved. Due to the historic reasons, we have many state-owned listed companies in China’s capital markets. Meanwhile, in recent years, together with the economic growth, the number of private-owned listed companies is gradually increasing, and especially the introduction of the SME board in 2005 and Growth Enterprise Market in 2009 have further promoted lots of small and medium-sized enterprises listed in the stock market. Consequently, whether the capital structures of firms with different natures are also different is the second issue that we will focus on. Under China capital market’s unique regulation and financing system, via an empirical study, we try to test if the internal constraints of companies with different natures are identical.Instead of pursuing great achievement in the theoretical part, we place our interest on the empirical studies, in this way, testing whether relevant capital structure theories suit China’s capital market and giving some suggestions on the reform of the state-owned enterprises and China’s capital market.The empirical findings show that there’s no great difference between the determinants of capital structure of China’s listed enterprises and that of overseas ones, which can be explained by trade-off theory and pecking order theory.In this paper, we explore the index of ownership structure further, since there are large variations on its parameter estimates obtained by using samples of state-owned and non state-owned listed enterprises. We believe that based on the current capital market environment, both the financing channels and the agency problems of these two types of listed enterprises are also possibly different. Meanwhile, based on the samples of state-owned enterprises, our finding is that due to the weak market environment and lack of effective regulation constraints, state-owned listed enterprises with high ownership concentration usually have low debt level. We guess, that this low debt ratio can stand largely depends on the typical state-owned listed enterprises’controlling chain mode, namely, State Assets Administration Committee—Group Corporations—Listed Enterprises. In other words, despite of financial distress and cash flow shortage, listed enterprise could obtain the support from the Group Corporation as its controlling shareholder, and therefore would choose a capital structure with lower debt ratio.