The Empirical Study On The Relationship Between Capital Structure And Performance Of Company Listed In Shenzhen Stock Market

One of the significant characters of Chinese capital market is separated equities which classified as circulating equities and non-circulating equities. Accordingly the financing method of listed companies in China can not explained by the classical theories of capital structure which proved by other foreign countries. Due to this distinct difference, the listed companies of China has a tendency of issuing equities to finance capital without consideration on whether project results in good returns. Therefore, so many experts analyzed this paradox from various angles and concluded that there was a negative relationship between capital structure and performance of listed companies in China. The reason why this phenomenon existed is that our china has not established a satisfactory institution of bankruptcy. Because of lacking this kind of institution, so many listed companies controlled by state can hardly go bankruptcy. In order to clarify the true relationship between these two aspects, the author selected the listed companies which state hold equities less than ten percent of the whole in Shenzhen stock market as the sample companies for empirical study. Through this way, we can eliminate the main influence of state-owned-equities on listed companies and enhance the comparability of theories of capital structure between China and foreign countries. Undoubtedly, this paper will be also proved useful for financing strategies of companies as well as administrating of capital structure.