The Relationship Between The Liquidity Of Stock And The Capital Structure Of The Listed Company

Decisions ralated to the company's capital structure is one of the most important decisions,which matters the realization of a company's value.Plenty of scholars that have been working over this problem for years have reached a conclusion that capital structure is closely related with the liquidity of company's stocks,and there are further studies in this area.But domestic scholars has few involved this at persent.Based on the background of the theory of micro-structure and Chinese stock market,This paper finds out that there exists a remarkable endogenous relationship between the above capital structure and liquidity,they often interact as both cause and effect.This paper proceeds from the analysis of the present stock market in China, incorporates traditional capital structure theory,has introduced the theory foundation of the relationship between the two.We still summerize most research ralated to capital structure in the micro-financial market respect,analyse the influencing factors of liquidity and capital structure,based the above we establish a empirical model.We utilize datas of companies listing in the Shenzhen stock exchanges from year 2004 to 2007,after the descripitive statistics of each variables,we respectively employ turnover rate,Amihud liquidity indicator and relatively effective spread to measure the liquidity,through utilizing the method of two-stage OLS regression,we analyze the relations between capital structure and liquidity empirically.Utimatly, we conclude that a remarkable endogenous relationship exists between the above capital structure and liquidity,the higher level of the liability is,the stronger of the liquidity is,on the other hand,the rise of the liquidity will lower the capitial structure.At length we put forward our policy suggestions to the development of domestic stock market based on referring to the current situation as well as our theoretical and empirical studies.Also,we hope this paper will be of value to domestic researches about this area and firm decisions,investment decisions and financing decisions.