A Study Of Relations Among Corporate Features, Debt Financing And Business Performance

Debt financing is one of companies'important financing decisions, different debt levels or debt maturity structures actually mean different corporate governance modes, and it is a central issue in finance that how debt affects firm's value. Some scholars in China have studied relations between debt level and business performance, however, a few researchers in China studied questions about debt maturity structure. It that topic on debt maturity structure is a new research filed for scholars at home or abroad.This paper reviews correlative theoretical and empirical literature on debt financing, and analyzes systematically characters of Chinese manufacturing listed companies' debt financing structure. On this basis, the author put forward 16 research hypotheses. Then the author chooses 485 manufacturing listed companies from Shanghai and Shenzhen stock exchanges, regards corresponding balanced panel data sets as samples and carry out systematic empirical analysis with dynamic panel data models and first-differenced GMM estimation. Empirical analysis includes mainly include four parts:one on that how debt level affects firm's performance, one on how corporate characters factors affect debt level, one on that how debt maturity structure affects firm's performance and one on how corporate characters factors affect debt maturity structure. Four main conclutions are ultimately obtained. Firstly, manufacturing listed companies' business performance changes in "converse-U" way with the debt proportion becoming higher and it's best when the debt proportion is between 35% and 40%, corporate governance effect of debt financing is best this time. Secondly, firm's performance exists distinct discrepancy depending to companies' debt maturity and it changes in "U" way with the debt maturity becoming longer. Thirdly, there exists positive correlation relation between permanent assets proportion (corporates size, or growth) and debt level, it is negative correlation between non-debt tax shield and debt level. Fourth, there exists positive correlation relation between financial leverage and debt maturity, however, relation between free cash flow and debt maturity changes due to differences of financial strength.