An Empirical Study On Determinants Of Capital Structure Of Enterprises Listed On SMEs Board

Surrounding the three major capital structure theories——trade off theory, pecking order theory and agency cost theory, this paper drew 38 samples listed on small and medium-sized enterprises (SMEs) board of Shenzhen in 2004, and conducted an empirical study on the determinants of capital structure of SMEs.Firsly,this paper implemented a descriptive statistics and analyzed the overall operating status, the capital structure characteristics and the current status of capital structure determinants of SMEs.Secondly,this paper conducted a time series analysis of SMEs'capital structure, their capital structure determinants and the visual relations between capital structure and the determinants to compare the trend between pre-listed and post-listed. We found that the capital structure level of SMEs is so low and their capital structure is not very reasonable. In addition, the long leverage ratio is so low and the SEMs excess depend on the equity financing. What's more, the leverage ratio of post-listed on SMEs board is far lower than pre-listed. Thirdly, we used a uni-linear regression model to verify whether the enterprises listed on SMEs board have an optimal capital structure, and the answer is yes. Then, we utilized a pooled estimation regression model and panel data model to conduct a comparison study. We found that the leverage level of SMEs is a long time decision and a dynamic process. We also found that capital cost, non-debt tax shields, earning ability, assets security value and firm size are the notable determinants of capital structure of SMEs; thereinto,assets security value and firm size have a positive correlation to leverage ratio, capital cost, non-debt tax shields and earning ability are negative to leverage ratio.Lastly,considering the SMEs's low leverage ratio level, excess dependence on equity financing and the notable capital structure determinants, this paper put forward the methods and suggestions to optimize the capital structure of SMEs:our governments need to optimize the macro economic environment through perfecting corporate bond market and SMEs need to overcome the disadvantages and exert the advantages. They also need try to broad multi-tier financing channels; dynamically adjust their capital structure; maintain the elasticity of the capital structure, and retain a reasonable leverage level to keep the capital increment to realize the enterprises value maximum.