Empirical Analysis Of Capital Structure And Firm Value Of Listed Companies In China

The company's capital structure theory is the core of modern corporate finance theory, and the contents of the foundation of modern financial theory. The relationship between capital structure and the company value is the eternal topic discussed in capital structure theory. It is important to study the impact of optimizing capital structure on the value of the company. Theoretically, the operation and management of listed companies is appropriate for our study of capital structure, and listed companies are based on the capital market, so listed companies are chosen to study in this paper.Proper capital structure is of great sense in our country: specifically, improving the capital structure is helpful to increase the value of companies, to increase the efficiency of financing and operation; generally, it is helpful to reform the financing institutions, to set up and enhance the financing systems including company debt market, to convenience investment and financing activities of the society, allocate financing resources economically, and as a result to speed the long term economy increase.It is stated in the modem capital structure theory: in an efficient market, changes of capital structure will impact on the value of company; and capital structures of the companies in developed countries, which are based on a somewhat efficient market, has proved this theory. So it is inferred that capital structure is tightly related to the value of company.This paper is devoted to analyzing demonstratively, if the capital structure of a company does impact on its value, and 'verify foreign classic theories, and check the appropriateness in China of the theory: "The debt-equity ratio which has impact on company's performance is ranged between 0.23'-~0.45' ,which is backed by the majority of scholars. Debt-equity ratio is chosen to reflect the capital structure, and return of equity (ROE) is chosen to reflect the value of the listed companies. With years' data of the listed companies, the relationship of their capital structures and their values is analyzed both demonstratively and theoretically.By the demonstrative analysis and study of the current situations, conclusion is drawn in this paper: 1.Great difference exists between domestic listed companies' capital structures, and this reflects different operational environment they face and their various operational styles. 2. When the ratio of debt capital to equity capital is appropriate, both the performances and values are satisfactory. 3. Capital structures of a big portion of listed companies are not proper and this deteriorates their values. 4. Debt-equity ratios are relatively high for the domestic listed companies.To address the above listed issues between capital structure and the company value in China, after studying, this paper puts forward some policy recommendations.