The Research Of Public Firm Debt Conservative In China

As the core content of modern finance research and application, corporate finance has been attention to the scholars and entrepreneurs. It affect the company's financing cost and capital structure with the use of different financing tool, such as bond?loan and equity. Then, these will affect the value of the company and shareholder's wealth ultimately. So the capital structure research has been paid more attention by researchers in the study of corporate finance. For sixty years, scholars have gradually formed on many capital strcture theories based on relaxed the MM theorem hypothsis.Classical capital structure theory, such as tradeoff theory and agency cost theory, propose that manager agent cost may be decrease and company value will be increase beasue of the the shield of debt interests, if the firm has moderate liabilities. Therefore, these capital strcture theories think there exists an optimal capital structure in firm. When firm's leverage attained to its optimal value, it will be helpful to maximize shareholder wealth.But, in the real economy, a lot of firm's leverage did not achieve its optimal capital structure, there are some firms give up the interest tax shield of debt, they do not use any debt financing. How to explain the firm capital strcture anomaly which is conflict to the classical capital structure theories? Why firm choose debt conservative decision and get to debt free? Now, recent studies about firm extra debt conservative mostly focused on the developed countries' company, these are based on the effective capital market. All the results and interpretation are coming from the classical capital structure theory hypothsis. There is little advice and explain to the developing country's firm debt conservative. So this thesis is first to learn the firm with debt free in the economic transformation countries methodically.First of all, on the basis of redefine firm debt conservative, this thesis learn the debt free public firm in China A share main board from various dimension, for example, time, industries and regional et al. the results suggest that firm extra debt conservative is not a temporary phenomenon, some firm go on conservative debt financing for several years. Moreover, the ratio of fiem debt conservative has showed a increasing trend from year to year. Debt free firm has different rate in different industry and regions.This vision is worth to studt in corporate finance.Then, we construct a research samples through choosing leverage firm matched with the size, industry and year for the debt free firm. Based on the background analysis of China's institution and corporate financing environment, this thesis analysis the determinants of corporate features, managers characteristics, corporate governances, industry and product market, financing environment, macro environment et al on firm debt conservative, using the method of statistical and theoretical model analysis. The results shows that the finance constraints, financial flexibility can explain the firm debt free in China partly as well as it in developed countries such. But, there are special and main resons for Chinese firm debt conservative. It's the higher degree of ownership concentration of public firms and super raising funds of company in the stock market. This is also the most different reson for firm extra debt conservative between China firm and developed contries. Regional institution environment and industry policies, product differencies also are the determinants on firm debt free in China.Third, by constructing a portfolio, we calculate excess returns of portfolio of debt free firm and leverage firm. At the same time, we also calculate the finance performance of these two portofolios. Compare to the performance of portofolio, we find the debt conservative firms, whether state controlling or no-state controlling, all have better finance performance than leverage firms. Moreover, state controlling debt free firms'market performance is best. Even after controlle the factors of risk, size and market, the state controlling debt free firm porfolio has significant positive excess returns. This result is contrary to the classical capital structure theories.In sum, the thesis supplements new evidences of firm debt conservative. The research results indicate that the firm does not always use the optimal leverage, more and more firms become debt free. The determimants of public firm debt conservative in China is difference from developed contries. There are unique reasons making Chinese firms to give up debt financing and to use the conservative capital structure strategy. The classical capital structure theory which was born in the developed contry should must adjust and correction according to the time and environment.