Empirical Study Of Effect Of Capital Structure On Equity Agency Cost On Base Of China Listed Company

The key to corporate governance is reducing the agency cost which is brought out from separation of ownership and management. Capital structure reveals different sources fund apparently .but essentically embodies the relationship of different property right subjects behind the funds. Proper capital structure plays an important role in reducing agency cost,improving corporate governance efficiency and amending business performance. As to how to reduce equity agency cost ,there are two aspects .One is increasing managerial stockholding level,accordingly it can increase the residual claims of management ,and improve intrinsicly the interests of management and enable the interests of management and stockholders to be at one.The paper employs 432 listed Company,using continuous three-year datas,from equity structure and debt financing .The result shows that ownership structure has not significant effect on equity agency cost , In theory ,the proportion of management shareholding can reduce equity agency cost,but the proportion in Chinese listed company is very low ,so it has not distinct effect on equity agency cost. but it has negative correlation with equity agency cost. As to equity concentration ratio , equity agency cost is added with equity concentration ratio ,but when the ratio reaches 50%,the equity agency cost will depress with equity concentration ratio. it has something to do with state -owned stock proportion ,when the listed company has high rate of state stocks, government owned share is the controlling shareholder,in that case,it will lack ownership and increase the equity agency cost. when the equity concentration reach a proper proportion,other shareholders will be traded off with government shareholders,they will monitor the operator together,by this way,the equity agency cost can be reduced. Debt financing has distinct effect on equity agency cost,from either static asset debt ratio or dynamic rate of debt financing, the increase of liability can reduce equity agency cost.Well,liability can cause financial crisis .In addition to that, we must take debt agency cost into consideration. So liability is not the more ,the better, we must tradeoff equity agency cost and debt agency cost and minimize the sum.