The Choice Of Enterprise's Capital Structure

Capital structure determines the contract between the capital owners themselves and between the capital owners and the other parties at interest; it has close relations with corporate governance and corporate value. Asset specificity was paid attention to the problem of capital structure choice, one reason is the theory of asset specificity has been gradually accepted by more people; another is the close relation with the financing management environment that enterprise facing. In the frame of transaction cost economics, we analyze the relationship between asset specificity and capital structure, than conclude that enterprise with high asset specificities would prefer using equity. To examine it, we collect data from public companies form 2000 to 2004 in 5 years including all industries in china to do the empirical study on the basis of some important research results from former empirical studies .The study shows that asset specificity is negatively related to capital structure, which verifies our theory, and asset specificity expresses distinct industry feather.