Correlation Between Agency Cost And Capital Structure Of Listed Company In Machinery Industry

Optimal capital structure's decision and the reduction of agency cost have always been the main study of corporate finance theory. Capital structure has usually been defined as a combination of corporate long-term financing instruments. The main content of the theoretical study is its relationship with the enterprise value and the core issue is how to determine the optimal capital structure and to reduce agency cost in order to improve corporate value and enhance the competitiveness of enterprises.This paper is to analyze the correlation between agency cost and capital structure of listed company in machinery industry. Then empirical study has been finished by choosing machinery industry listed companies as a sample. The first chapter introduces the significance of this topic, research at home and abroad, research framework and the main research contents. The second chapter is to analyze the relationship between agency cost and capital structure theoretically, and to deduce the optimal capital structure of enterprises based on the agency cost. By putting forward hypothesis and controlling relevant factors, the third chapter is to establish quadratic regression model on a sample of listed companies in machinery industry. The forth is to obtain corporate optimal capital structure areas based on agency cost and get some inspiration. Finally, it is the main conclusions of this article.Through theoretical analysis and empirical research, the following can be concluded. Firstly, in the study period, there is an optimal capital structure area of listed companies in machinery industry, and the company's asset-liability ratio falls 50.49%-52.93% based on agent cost. Secondly, by using management fee rate and asset turnover to measure agency cost, it has a significant quadratic relationship with capital structure. When the asset-liability ratio is low, the management expense ratio has a negative correlation with asset-liability ratio, but asset turnover was positively; and when the asset-liability ratio is high, the conclusions are opposite. Thirdly, by using management fee rate to measure agency cost, the company size, growth capacity, ownership concentration and the percentage of management ownership, except the proportion of independent directors, have a negative correlation with management costs. When using asset turnover as a measurement, the result is opposite.The main innovations and features of this paper are following. The first is to study capital structure based on agency cost of listed company in machinery industry, providing a new angle for the study of the corporate financing structure of machinery company. Secondly, this paper theoretically analyzes the non-linear relationship between agency cost and capital structure, through the establishment of quadratic regression model, so research results more accurately reveal the intrinsic relationship between them. Thirdly, the ability to grow and other relevant control variables are added in empirical research model on agency cost, avoiding the impact and enhancing the credibility of correlation empirical findings. In the measurement of agency cost, it is better to reveal the relationship between agency cost and capital structure through using overhead rate and total asset turnover ratio.