Empirical Study On The Determinations Of Capital Structure Of Chinese Listed Manufacturing Companies

In the past two decades, the capital market of China has developed rapidly, the Shanghai Stock Exchange and Shenzhen Stock Exchange have set up and start business. Besides the additional placement of shares, the listed companies can also apply for a public issuance of new shares since 2001. At the same time, the bond market has also been developed. At the micro level, the capital structure and capital market development are very closely linked with the development of capital markets. The purpose of this study is based on previous studies, trying to find the capital structure adjustment factors, and provide guidance to the choice of capital structure.Modern capital structure theory indicates that capital structure is the concentrated reflection of the rights of the company's stakeholders and obligations, but also indirectly affect the company's value. Thus there are many scholars from an empirical perspective and analysis of factors affecting capital structure for the firm's capital structure optimization of reference and recommendations.In this paper, there are five parts:The first part is introduction. Mainly from the concept of capital structure to start with the capital structure and financing structure to define the content, and the topics of this article describes the background and significance. The reason why we study factors affecting capital structure, not only because the choice of capital structure is an important financial issues, and because the capital structure affects the cost of funds of enterprises, while the cost of capital will affect the long-term investment projects and the overall effectiveness of enterprise level, the level of risk, thereby affecting the entire company's operating mechanism, the capital market development of is still not very mature, in order to speed up the development of capital markets and regulating behavior of investors, the article concluded by the Commission under the actual situation of our country continue to introduce new initiatives to provide a reference.The second part introduced the traditional capital structure theory, modern capital structure theory, as well as the results of researches of the factors affecting capital structure. Traditional capital structure theory:net theory suggests that, due to the cost of debt is usually less than the cost of equity, the optimal capital structure is 100% of the liabilities of business; the net operating income theory suggests that, although the return on equity less than debt interest rates, but the as the rate of return on equity increases with the proportion of debt increases, so regardless of changes in the proportion of corporate debt, the enterprise's cost of capital is always fixed, so the market value of companies has nothing to do with the debt ratio; eclectic theory holds that businesses within certain limits liabilities, equity and debt capital, the risks are not increased significantly, once beyond a certain range, it begun to rise and increase in speed is increasing, that is, the marginal cost increases. The theory is a theory of between net income and net operating income between the theories. Although the compromise theory closer to reality, but it is very difficult to quantify. This also gave birth to the modern capital structure theory.In 1958, Modigliani & Miller in the cost of capital, corporate finance and investment theory, a paper the market equilibrium theory applied to the company's capital structure research for the first time, made no corporate income taxes MM theorem, which marks the beginning of the modern capital structure theory. In order to derive the final conclusion, Modigliani and Miller gave six harsh assumptions. Since the premise of the conclusions are very harsh, so the conclusions derived by guiding significance of reality, has severe limitations.In order to overcome the limitations of the conclusions, Modigliani and Miller continue to relax the assumptions to consider corporate income tax and personal income tax. From then on, scholars studied the capital structure from different perspectives, and then put forward different theories, such as:trade-off theory, agency cost theory, information transmission theory, and the new pecking-order theory. Through these theoretical analysis is not only the theoretical basis of this study, but also explained a reasonable capital structure to us,and it may help to regulate the behavior of enterprises and improve corporate value, the research reveals the significance of the factors affecting capital structure.The main factors affecting, capital structure has three categories: macroeconomic factors, industry factors and corporate identity elements. These three factors, the paper focused on analysis of the company's capital structure characteristics of the impact factors. For the macro-factors, due to restrictions on the level of the author, it is beyond my consideration. Corporate identity factors include:the company size, profitability, cash flow, earnings, growth, state-owned shares ratio, asset structure, non-debt tax shield and the board size and composition.PartⅢis composed of research assumptions and model. This paper selected January 1,2001 to December 31,2006 at the Shanghai Stock Exchange listed manufacturing companies in the original sample. In order to ensure the consistency of the sample, we will limit the sample interval since 2001, mainly because from 2001, listed companies can, inter alia public offering of allotment of new shares. Whereas the previous is not allowed, select the sample can be avoided since 2001 because of regulatory policy changes of the shares the findings of significant impact. Manufacturing was chosen as the research object because the listed companies in the manufacturing, more than 60% of the total listed companies, so research, the manufacturing company's capital structure is more practical significance. In view of the establishment of the independent director system was started in 2001, the Commission to allow listed companies to improve within two years, so a valid sample is after 2002. Therefore, this article ultimately from 2003 to 2006 panel data set multivariate regression model analysis.Remove sample some of the outliers, we first conducted a correlation of the variables were analyzed by calculating the variance inflation factor, we conclude that:the selected samples, since the variables there is no serious multicollinearity, regression results are valid. And by covariance analysis test, we determined that the selected sample of the establishment of a fixed coefficient model is appropriate. Therefore, the empirical part, the authors of the panel data to establish a fixed coefficient model for analysis.Part IV is the results of the empirical analysis of. From a fixed coefficient model view of the regression results:company size, growth, earnings cash flow, asset structure and board structure and corporate capital structure a significant positive correlation between, while the profitability, the proportion of state-owned shares and non-debt tax shield and the firm's capital significant negative correlation between the structure.Although the theoretical analysis point of view, the same factors on the impact of capital structure from a different point of view, their impact is different. In practice, however, there is always a position or point of view is dominant. In this paper only the board size has been a wide gap between the study results. Abroad studies have shown that with asset-liability ratio is significantly negatively correlated, and this the return of this factor was not significant may be due to the mandatory requirements of the board. Empirical regression on the conclusion of the theory of capital structure in China to explore the applicability and the theoretical analysis based on the factors that determine the impact of capital structure.Part V is the conclusion of this paper. Based on the analysis of factors affecting capital structure, we proposed capital structure optimization from the three aspects. First, focus on corporate profitability, and second, on the basis of the earnings due consideration to expand the enterprise scale. The third, the independent directors system should improve as soon as possible.The main contributions of this paper are:(1) This article describes the structure of the Board of Directors into Capital Structure-factor model. As far as I know from the domestic research, the board structure as factors affecting the capital structure articles is rare. From 2001 to 2003, listed companies, the independent director system in China has gradually established and improved, while it is very important in corporate governance structure. Therefore, combining the actual situation of listed companies in China, examining the independent director system of capital structure is a contribution to this article.(2) In this paper, we take the manufacturing industry as a research sample of panel data of listed companies. The majority of previous studies based on industry-established model of cross-sectional data analysis, however, the analysis of cross-sectional data when the sample size is relatively less, the model degrees of freedom is relatively small, and thus the results of the model would have no representation. Some industries in particular, through the commander after the election, and only a few samples of 10 to enter the regression model, this conclusion is hardly any practical significance. In this paper, we select the listed companies accounted for the majority of the manufacturing industry as a research object, select the panel data to increase the model degree of freedom to improve the representativeness of the conclusions, this is another contribution of this paper.