Study On The Relation Between Diversification And Capital Structural In Chinese Listed Companies

Capital structure and diversification have been hot issue in the sector of company finance, However, the strategy of diversification and its firm's financial decision have been studied in two isolated fields for a long time.This paper will make theoretical analysis and empirical study of domestic enterprises in the field of diversification, explore the relationships between strategy of diversification to make helpful suggestions and offer valuable reference for the domestic enterprises. First of all, this paper initially makes the definition and strategy of diversification,and sums up the motive and influential factors of diversification, and gives the overall review of the latest literature on the capital structure theory. Secondly, the dissertation makes a review of relevant papers and documents to conduct a theoretical analysis of the relationship between diversification and the capital structure clearly and systemically. Based on theoretical analysis,providing hypothesis of this paperAnd then,on the basis of theoretical analysis, this paper applies multi-linear regression analysis of pooled data of Shanghai stock in 2004-2006 to make empirical study of the correlation between diversification category and capital structure, with the result showing that diversification and the degree of diversification has significant influence on the corporate capital structure; ownership makes a marked impact on this relationship: diversification lows the leverage of state-controlled enterprises significantly, while it's not the case for non-state-controlled companies. The coinsurance effect can explain why the state-controlled companies diversify.Finally, this paper brings up relevant policy-related suggestions, combined with the empirical fruits and the practical circumstance.