A Study On The Correlation Between The Capital Structure And The Stock Liquidity Of The Listed Companies In China

Company's capital structure and stock liquidity have always been the hot topic in financial study. The company's capital structure reflects the different sources of funds and a reasonable capital structure is critical to maximize the value of a company. As stock liquidity costs reflect the size of the equity financing, so a company's capital structure must has some connection with its stock liquidity. This inference has not only aroused the attention of foreign scholars, but also aroused great interest from domestic scholars. Therefore, based on previous research on the capital structure theory and liquidity premium theory, this article choose the empirical analysis as a research tool to test their relationship on our Chinese stock marketFirstly, this article starts from the real background of the stock liquidity,and then put forward the practical significance to study their relationship.By reference to the previous literature and related theory, we put forward the hypotheses and build an empirical model. By selecting Shanghai and Shenzhen Stock Exchange A share listed companies as research subjects, using the asset-liability ratio and long and short-term debt ratio as alternative variables to measure capital structure and using turnover and weak liquidity as alternative variables to measure liquidity, this paper makes an empirical test on the relationship between capital structure and stock liquidity of the listed companies in China.This article finds that the there is a significant and endogenous relationship between capital structure of listed companies and stock liquidity. Specifically, when corporate liabilities rate increases, it will enhance the stock liquidity; and high stock liquidity will reduce the company's liabilities rate. To ensure the accuracy of our proposed model and empirical results, Hausman test method is used to test the model and manufacturing industry is used to test the empirical results.Both of the results support our conclusions.Finally, this article gives an in-depth analysis and summary on the conclusions. With drawing on the advanced experience of foreign mature markets, we put forward some recommendations to these corresponding issues.