Determinations Of Capital Structure: Analysis On Chinese List Companies

There have been 40 years since the issue of the great paper—'The Cost of Capital, Corporation Finance and the Theory of Investment'. Research on capital structure attracted experts in finance. There are some strict suppositions in M-M theory: entirely efficient capital market, no tax, no transaction costs, etc. Statistic Trade-off Model and Pecking Order Theory are two primary genres of research on capital structure. We can solve the problem of Chinese capital structure successfully if we study the above theories in-depth.Nowadays proper selections for capital structure have become one of most important corporation strategies in China. Thus, studies on determinations of capital structure of Chinese listed companies become indispensable.This paper wants to find Chinese companies how to determine their capital structure, especially during the period of Chinese economy transformation. We expatiate the purpose and the plan of this paper. In the next part, we compare the Statistic Trade-off Model and Pecking Order Theory. In the 3rd part, we find that the general capital structure of all listed companies in China presents decline trends. We also find that Chinese listed companies prefer issuing equity and industry & region are effective to explain alterations of companies' capital structure. In the 4~h part, by means of panel data model and TSCS model, we test the Statistic Trade off Model and Pecking Order Theory. Results of test show that the Statistic Trade-off Model has much powerful explanation. In the next part, we analyze factors of determination on capital structure and give some advice to the governor. We sum up conclusions in the end.