An Empirical Analysis Of Relationship Between Capital Structure And Business Performance Based On The Yangtze River Delta SME Board

Research on the relationship between capital structure and business performance began in the 1950s, when the MM is the most influential theory which laid the foundation of the theory of modern capital structure. Since then basing on different perspectives scholars made more capital structure of the new theory model such as the principal-agent theory, signal model and so on, but there is no satisfactory and definite answer to the relationship between the capital structure and business performance. And with the development of economy, the optimal capital structure has become most important way to make the business performance maximization. In a word, the study of domestic and foreign literatures is very significant in theory and reality.This thesis chooses small and medium-sized enterprises (SMEs) as research samples which locate in Yangtze River Delta region and have listed in SMEs board of Shenzhen. Basing on the concept of broad capital structure, the thesis analyze the samples of the relationship between capital structure and business performance by constructingthe interaction system mode among ownership structure, debt structure and performance in order to explore the effective ways and measures about optimizing of capital structure and improving business performance. This article mainly includes the theoretical deduction, the current situation analysis and empirical studies three aspects to study the relationship between the capital structure and business performance basing on the data of sample enterprises. Firstly, the deduction of theory is foundation of research. It can be divided into three parts: the first part is the capital structure theory, which involve in history of capital structure theory in order to provide the theoretical basis for building the model; The second part is the business performance theory, the paper mainly analyzes the evaluation method of the business performance of enterprise, providing the performance index selection criteria for building the model; the last part mainly involves domestic and foreign literatures about the relationship between capital structure and performance, analyzing the model and the conclusion of literature in order to lay the framework for building the model. Second is the status quo, which shows the status quo of capital structure and business performance of SMEs through descriptive statistical analysis of data of the sample enterprises. Finally, the empirical research is the last objective. The empirical analysis has major two steps: the first step is analysis and inspection of the single equation using ordinary least squares (OLS). The second step is to establish simultaneous equations owing to considering endogenous using two-stage least Square (2SLS).In the research on the choice of methods, this thesis mainly adopts the method which combines theoretical with empirical. In theory, it analyzes the inner link between capital structure and business performance basing on the study of literature, to provide the necessary of empirical research theory and model frame; In the empirical research, choose large sample data and strictly comply with the standard of empirical studies program, and then analysis the data of samples enterprise using Eviews6.0 and SPSS17.0 statistical software in order to explore the relevance between the capital structure and business performance, providing evidence for the relevant policy.Through the above theoretical analysis and empirical research, the author draws the following conclusions: the largest shareholding ratio and after the nine shareholders'which are on behalf of ownership concentration are negatively related to the business performance. Secondly, the management shareholding and business performance are significantly U-shaped relationship. Thirdly, the proportion of outstanding shares is positively correlation with business performance. Fourthly, it shows inverted U-relationship between performance and corporate debt ratio which represent the structure of corporate debt. Fifthly, the largest shareholding ratio representing ownership structure index is significantly negatively correlation with corporate debt ratio. Fifth, ownership structure index structure of the first indicators of shareholding and debt gearing ratio was significantly negatively correlated; Sixthly, through the establishment of simultaneous equations and identification and testing, find that there is the significant interaction among debt structure, ownership structure and business performance .