| Since Modigliani and Miller published their seminal paper in 1958,the issue of capital structure has generated great interests among financial academics and practices. The MM supposes that the firms' capital structure is not correlated with its market value with the conditions that there are no trade cost, tax and information asymmetry. The MM theory just describes the ideal status. From 1960s' to 1990s', many scholars release some theoretical hypothesis of MM to meet the realities of business. And they find that there is nearly relationship between the capital structure and firm's market value. Empirical examination of the determinants of firms' capital structure is also conducted.This paper employs the accounting data of Chinese listed companies from 1999 to 2001 to investigate the relationship between varies factors and firms' capital structure. Firstly, we conduct a through empirical study on the industrial characteristic of capital structure. Results show that: there are significant differences among the capital structures of different industries, which is not caused by the extreme values. And the phenomenon is rather prevalent in different industries. Secondly, we put forward the empirical analysis of the determinants of capital structure. We find that leverage in Chinese firms increases with firm size, ownership structure, tangibility, profitability and cost of financial depress, and decreases with growth opportunity, interior resource generation and non-debt tax shields. But the effect of the investment and cash dividend is not definite. The empirical analysis of the determinants of capital structure shows the way for us to optimise firms' capital structure. And we think that it should be a dynamic process. Finally, we conclude that the realization of optimal capital structure should pay more attention to the following aspects: the industrial characteristic of firms, firm size, growth opportunity, profitability, ownership structure and the tax shields.
|
PDF Full Text Request