Empirical Research On The Effect Of Corporation Tax Policy On Capital Structure

Capital structure is an important issue in corporate finance. Since the MM theory appeared, corporation tax is always the main object of research. And theories indicate that corporation tax is an important factor which affects capital structure. However, these theories are based on the environment in the west countries. It makes sense that we research these theories application in the special environment in China. So this paper researches on the different tax rate influence on capital structure, under the corporate tax police in China. And we could forecast the fluctuating trend of the capital structure with the tax rate changing in the future.This paper chooses 361 companies in the list as the research objects which range from 11 industries. And we use total debt ratio, modified debt ratio and long debt alteration ratio as the dependent variables, marginal tax rate as the explanatory variables after controlling other variables which have effect on capital structure. In order to avoid the effluence from the multi-liners of variables, we use the method of factor analysis. Then we put three dependent variables separately and all of the independent variables into linear regression. Aim is to filter out the main control variables, and enhance the effectiveness of explanatory variable, through the comparison and analysis of results.Form the results, we find that total debt ratio and change of long-term debt effect marginal tax notable, except modified debt ratio. It means that total debt ratio and long debt alteration ratio could measure capital structure of listed company in China properly.The research results also indicate that corporation tax has statistical effect on capital structure, and the higher marginal tax rate, the higher debt ratio is. As for controlling variables, the results indicate that the capital size is positive correlated with capital structure, yet the possibility of bankruptcy is negative correlation. Return on asset, growth of the company and the controllers have no distinct correlation with it. As for the industry factor, it indeed has influence but different industry shows different correlation.In a word, corporation tax policy has effect on capital structure, because of the difference between tax rates. And the company will adjust its capital structure with the corporation tax policy changing, considering the special environment in and out company,to make the value of company maximum.