Industry Differences Of Capital Structure And Its Determining Factor

As different industries are facing different market competition, industry growth cycle, the level of risk, operational characteristics, assets, and other factors, both internal and external, on the surface there will be differences in capital structure trades. However, whether this difference is there really that much difference, what is the determinant factor for the decision? This paper from the industry perspective, attempts to answer these questions through empirical analysis.According to the China Securities Regulatory Commission industry classification standard, we classify the China listed companies, conduct a though empirical study on the industry differences of capital structures of which we explore the main determinant on the basis. The results show that: (1) There are significant differences among capital structures of different industries. About 6% of differences among companies can be explained by there industries; (2) There is an optimal capital structure among China's listed companies; (3) The main determinant of industry differences in capital structures is industry risk and the capital structure and risk between industries showing a downward quadratic function.Finally, according to the above empirical results, the paper gives corresponding suggestions on how to improve the corporate capital structures.