Empirical Study Of China's Listed Manufacturing Companies Debt Financing Structure And Corporate Performance

In this paper we have researched the capital structure that mainly comprises the lever effect and debt maturity, comparing the affection on the profiting with that on the company scale from debt financing.Through empirical analysis, we find that the profiting is negative related to the financing lever and the company scale is positive related to the financing lever. The reason may be from the soft debt constraint in the manufacturing industry. The increase of D/A(debt to asset) could not motivate the management to make use of capital to improve the operation and profiting efficiently, but leave heavy burden on the company. As a result, daily operation and profiting are declining. Listed companies from the manufacturing industry prefer to increase the scale by duplicating after debt financing, leading to the waste of resource.As the increase of short-term debt the profiting of listed manufacturing companies is declining. In China, the motivation effect of short-term debt is seldom because the immature of capital market and the existence of the mass illiquid shares hardly lead to the destiny of being taken over. As a result, the pressure from repaying the interest and debt is more than the motivation effect. The increase of the short-term debt ratio could only bring the risk of bankruptacy.In the paper we have not found the relation between the ratio of illiquid shares and the profiting. However, in the group with D/A(debt to asset) higher than 60%, we have found that the ratio of illiquid shares and profiting are significantly negative related. It is because that only when the D/A is higher and the pressure of repaying the interest and debt is increasing, the management will try to repay them with new borrowing rather to manage to improve the operation if without external takeover. As a result, the cash flow will drain and the profit is negatively affected.