The Relevance Between Company Capital Structure And Value & The Selection Of Company Capital Structure

Generally speaking, people always take the existing of relationship between capital structure and company value as granted. And that happened to be the main opinion of traditional theory. However, people' s previous opinion will be changed by MM Axiom. It says the companies' value is identified by a discount rate to their net profit. Then it should be no relationship with their capital structure. Serious system, beautiful mathematic model and interesting process of confirmation, all these help MM Axiom become the heart of the theory of capital structure. From that on, the traditional opinion in our head has been displaced by the un-relationship theory. Although displaced of their good place, the traditional groups never give up fighting for their theories. More important is that the finance theory which is closer than other theories to the real economic lives does not support the MM Axiom. They are able to break down M&M's points. Starting from the background and the real sense and using a comparing analysis method, my thesis has compared the two aspects of the capital structure theory and got a final conclusion that it has a real relationship between the capital structure and the company value. By analyzing about 200 companies listing on Shanghai Stock Transition Institution and Shenzhen Stock Transition Institution, we could make many rules for the related companies. And by analyzing these data, it indicates the real economy coincide with our rules. The best wish for the rules is it could make some sense in offering reference for the related companies.