Study On Governance Effect Of Capital Structure Of Listed Company In China

Capital structure demonstrates the different sources of corporation funding, but essentially it discloses the interdependent relationship between different ownerships underneath different types of funding. Basically, the capital structure represents the profits distribution pattern between different groups. Different corporation governing problems are formed by different combination style of stock ownership and creditor's right. A rational capital structure is important to reduce agent cost, improve corporation governing efficiency and increase corporation profits. Stock ownership and creditor's right represent two different corporation governing methods of investors. Creditor's right can be used to supervise and choose the investors and their projects, confine the operation misconduct of corporation managers. Stock ownerships can be used to influence the corporation governing efficiency through such methods as inspiration mechanism, supervision mechanism, merging and purchasing, and competition on consigned voting right. The capital structures of marketed companies in China are not optimized. The main problems are low debts' ratio, low ratio of bond financing, unreasonable debt's structure, high ratio of state-owned stock. The significance of studying the capital structure of China's marketed corporations is not only to point out the problems but also to improve the healthy development of those corporations and complement their governing mechanism.This paper is focused on the capital structure and governing effects of marketed corporations. In the introduction, the studied subjects are introduced and a review is made on the theory of capital structure. The governing effects of capital structures are analyzed from the different governing effects of stock ownership and creditor's right. Then theoretic and example analysis methods are used to conclude the governing effects of capital structures of China's marketed corporation. Finally, based on the current situation of governing effects, this paper gives suggestions on improving and enhancing the governing effects of corporation capital structure.