Empirical Research On Capital Structure Based On Grey Relational Analysis

Companies'capital structure decision not only affects capital cost and the feasibility of investment projects but also influences market expanding strategy and corporate governance structure, so the research on capital structure has been paid widespread attention. The decision-making of capital structure is a complex systematic engineering. Though existing research yield substantial results, some questions are existed. We should find a new method to analyze capital structure much further.As one of the main methods of Grey System analysis, Grey Relational Analysis method quantitatively describes and compares the dynamic process and development tendency of the dynamic system. Grey Relational Analysis method is effective in researching the questions with poor information and uncertainty problem. This paper studies the capital structure from the angle of view of its dynamic variation with the method of Grey Relational Analysis. The use of this method makes it possible to study the capital structure of a company, the industry with fewer companies and subdivision industry. It makes up for the shortage that the common methods can not analyze the influence factors of capital structure of single company.This paper studies the capital structure of the listed companies of china following the research idea of from local to global. This paper selectively analyzes the capital structure and its influence factors of all companies instead of certain company of certain industry. On the one hand it is because that global study is of advantage to the companies selecting proper capital structure according to its own condition and other's practices. On the other hand, as the study effect of this method is unknown, putting it this way is advantage to confirm the study effect by the way comparing to previous findings and lay the foundation for the future study.This paper does an empirical study on the capital structure of Chinese listed companies listed before December 31st 1999, using panel data for a sample of 687 selected listed companies from 2001 to 2007. The main findings are as follows: firstly, it is effective to study capital structure using the method of Grey Relational Analysis; secondly, The state of capital structure is unsatisfying; thirdly, there are wide differences between the capital structures of different companies and the generation of this phenomenon is not because some companies capital structure is unreasonable; fourthly, the capital structure of Chinese listed companies is affected by form size, interest rate level, inflation, asset structure, the growth of enterprise. However, the associative direction between them is different.