| A vast amount of outside capital is necessary for the development of the companies. So the companies become extreme attention to the financing. While seeking for the capital, the companies are necessarily concerned with the cost of financing. The capital structure is one of the key factors to influence the cost of financing directly. Meanwhile, with the competition between companies become intensive, the capital structure play even more important role in companies' competitiveness. More and more companies facing intensive competition made the decision about capital structure based on its environment of their products' competition, companies' strategies and the environment of capital market. Then what about their capital structures? Are their capital structures reasonable? The companies and the authority concern these questions. Since the final goal of a company is value-maximization.It is necessary to research the relationship between the capital structure and firm' s value. The thesis comprises five chapters.Chapter one tells the importance of capital structure and the characteristics of companies facing competition.Chapter two includes three sections. Section one summarizes, the development path of the Capital Structure Theory. In this part, the Naive Capital Structure Theory, Traditional Capital Structure Theory and Modern Capital Structure are introduced. MM Theory and Trade-off Theory in the Modern Capital Structure Theory are paid much attention; Section two reviews its relevant study. Furthermore, in section three, the author elaborates the fruits and problems of capital structure research in China.In Chapter three, six sessions are included. First the research background is introduced, then the research premise is analyzed. In this chapter, much attention is paid to how to measure the variables such as the capital cost, firm's value and capital structure. Based on the research of the vanguards in this field, I creatively analyzed the problems of the composition of the debt financing, interest disbursement and capitalized interest, and then made some adjustment accordingly to make the research more reasonable and more realistic. Besides whatmentioned above, the source of the data used and samples are elaborated.Then in Chapter Four I Investigate the financial leverage of China' s listed firms in 2000 and 2001 in Tele communication and computer line by using the statistic methods and financial data. The results demonstrate that the level of long-term debt financing is a little low while the short-term debt financing is preferred. After analyzing the advantages and disadvantages of most existing research approaches, I establish a linear regression model to test the quantitative relation between the financial leverage and market value of the listed firms in China.In the last Chapter, basic conclusions and some relevant conclusions are made. The results show that the financial leverage as the independent variable is significantly positively correlated with WACC in Tele communication and computer line, i.e., it is significantly negatively correlated with market value of the firms. According to Trade-off Theory, the level of the debt financing is unduly high, so the companies should try to lower the financial leverage in order to increase their market values. The authority should loose the requirements demanded on the companies in Tele communication and computer line, in this way the Companies value will be enhanced. Besides, the results show that short financial leverage is significantly positively correlated with WACC.but the long financial leverage is negatively correlated with WACC, it follows that the listed companies in Tele communication and computer line should increase the long debt despite the decrease while they should downsize the overall debt. Lastly come the problems existing in the thesis and suggestions on the following research.
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