An Empirical Analysis Of The Financial Leverage Effect Of Listed Companies

In the developed countries such as Great Britain and the United States, industries operate with little capital of their own. The self-owned capital is 25% for the US, 10% for Japan, and 17% for Britain. The rest of the operating capital comes either from the bank loan or the shareholders. Because industries operate mostly in debt, thus they have to estimate accurately how much their after-tax profit will be. Otherwise, they will feel impossible to pay the loan interest or gain profit for the shareholders, resulting in financial difficulties or even bankruptcy.With the advent of the globalization of the world economy, the Chinese industries adapt themselves to go in line with their foreign counterparts. Accordingly, they must learn to make good use of the financial leverage effect in practical operation, which is a vital ingredient of industrial financial management.Financial management has long been a research of focus in the developed countries while it is new for the Chinese industries. Naturally, this paper looks into this problem so that industries can optimize their finance and realize the best profit.The thesis starts with a summary of literature review and makes some comparison among them. In the second part of the thesis, it dwells on the concepts of capital structure and financial lever. In the third part, it makes an analysis into those quoted companies in Shanghai and Shenzhen, figuring out an average financial management level and they have employed the financial lever.The last part of the paper summarizes the previous analyses and, with regard to the Chinese industries, ventures to put forward of eight personal views to seek comments from the research colleagues. The proposed suggestions cover individual differences and optional employment of the financial lever, correcting the prejudice of the Chinese industries in financing, increasing the flexibility of financing, adding to the flexibility of industrial financial lever management, changing the industrial habits of alien financing, matching financial lever management to the expected profit, optimizing the shareholding structure and establishing financial risk-controlling system.