A Research On Capital Structures Of Chinese Non-Ferrous Metals Company

Since the well-known MM theory was proposed by Modigliani and Miller in the 1950's, the western economics circle has made great progress in capital structure theory. Alongside with the development of western capital market and the application of capital structure theory in the real world, the capital theory has built up a relatively complete system in the west. The study of capital structure theory started in the 1990's and the preliminary work was mainly to introduce the western capital structure theory. It is only in the last few years that we began to study the capital structure from the empirical perspective. In fact, we are just standing on the starting point of capital structure research.In this paper, I shall choose the nonferrous metal industry as the empirical object, which is an important cornerstone industry for our national economy and provides indispensable materials and ordnances for the national economy, defense industry and civilian daily life. This paper chose the nonferrous industry listed companies before Jan.1,2004 as samples and by eliminating the Special Treated (ST) companies, there are totally 29 samples. I started with the annual reports of these companies from2004 to 2008, following the methodology of combining the quantitative and qualitative analysis. Considering the reality of the Chinese market, I listed company scale, profitability, non-debt tax shield, asset backed value, growth, ownership concentration ratio, and the perspective proportions of government-owned share, corporate equity, management option and floating stock in total stock as influencing factors and studied the influence of them upon the nonferrous metal listed company capital structures and compared the differences among industries. After studying these, I came to a conclusion that the company scale, profitability, non-debt tax shield, ownership concentration ratio and the proportion of management option and floating stock shows outstanding influence on capital structure, while the influences of asset backed value, growth and the proportion of government owned share and corporate equity are tenuous. In the end, based on the empirical result, I made some optimizing advice for nonferrous metal listed companies, including a summary of aspects like enforcing the concern of capital structure, changing financing method, valuing the non-debt tax shield, bettering the operation performance and government perfecting the securities market, etc.