The Dynamic Decision Of Capital Structure From Listed Firms In China

The development of the theory of capital structure has gone through the stages of traditional theory, modern theory, new capital structure theory and post capital structure theory. In the respect of research measure, empirical research for the capital structure has developed from the simple static models and static analysis to dynamic models and dynamic research methods stage by stage.The paper starts with the basic concepts and theories of dynamic capital structure, constructs the dynamic model of capital structure after amending previous model. Research conducts an empirical study on the determinants of the optimal capital structure and adjustment speed towards the optimal capital structure with non-balanced panel data. Particularly, the study focuses on the relationship between industry average of capital structure and optimal capital structure and adjustment speed.This paper focuses on the industry characteristics of the dynamic adjustment of capital structure. The evidence of results indicates that industry average of capital structure has positive impact on the optimal capital structure of the listed firms in China. Normally, the industry average is regarded as an important factor in determining firms' optimal capital structure, which shows the convergence trend to the industry average of capital structure. Besides, the empirical analysis shows that industry average of capital structure has also impact on adjustment speed of capital structure. The distance between industry average of capital structure and actual capital structure affects the pace of adjustment. Furthermore, the article also empirically tests how the other firm characteristics effect on optimal capital structure and adjustment speed. The results show that size and tangible assets have a negative relationship with optimal capital structure, growth have a positive relationship with optimal capital structure, growth and size have a positive relationship with adjustment speed.