Research On Capital Structure Of Internet Industry

Along with the development of the Internet industry and the promoting function to the economy, Internet related enterprises are playing an increasingly important role.But the related researches of Internet companies, especially on capital structure, are very few. In order to study the capital structure of Internet industry, and for a better understanding of the rational knowledge of the Internet industry, I conducted the following research:Part one, summary of relevant existing studies. To study domestic and foreign research which based on capital structure theory, I found in the theory of capital structure, domestic is less, more is depend on theories of foreign; And in terms of factors influencing of capital structure, domestic and foreign researchers have the same point, profitability, size, industry, growth and macroeconomic environment are the factors on the capital structure of enterprises; In terms of capital structure and financial risk, they have argued that incorrect use of financial leverage will lead to a financial crisis, and the capital structure and other indicators can be used to predict.Part two, explains the basic theory of capital structure: MM theory, the trade-off theory, Agency cost-based theories, Signaling theory and pecking-order theory.Part three, about the indicators used in research. In order to study capital structures, also taking into account the non-current liabilities account for relatively small, this paper adopts a broad concept of capital structure, that take all debt into capital structures. In addition, as this paper is about capital structure, so the financing risk is the main consideration, it is most closely related to capital structure risk.Part four, study on the capital structure of the industry.First of all, describe the characteristics of the industry. After data analysis for all domestic listed companies in the Internet industry, the industry’s capital structure has the following characteristics: Debt to asset ratio lower than other industries, what is about 40%; there is an obvious difference between listed companies, domestic firms in the United States listed the average asset-liability ratio to be higher than in the domestic market; debt to asset ratio is relatively concentrated.Second, it is the contrast between industries. When compared with the manufacturing industry and the Internet industry, we find these characteristics:Compared to the manufacturing industry has been relatively stable capital structure,asset-liability ratio of the industry on the rise of the Internet; Relatively high ratio of liquid assets to total assets; In terms of current liabilities, the manufacturing sector remained relatively stable, while the Internet industry slowly declined; These differences can be explained by signaling theory, and also can be explained factors which have impact on capital structure such as growth and profitability, size, industry.Again, industry comparison of companies is in different countries: debt to asset ratio of United States Enterprise is high; the proportion of liquid assets and current liabilities of Chinese enterprises were higher than United States Enterprise. This is due to the development of the enterprises of the two countries stage, growing in different, United States enterprise risk and profitability due to stronger.Finally, it is the research on the relationship of financial risk and capital structure and profitability. This article focuses on the financing risks, because fewer Internet companies depend on debt financing, so the financial risk is small. With regard to profitability, because of less data, the degree of relationship between the two for failing to give certain.Part five, case study. An enterprise with an average asset-liability ratio is select.We found that although the capital structure has a positive correlation with profitability, but the right capital structure does not the only reason. The poor profitability of the enterprise, mainly under the influence of factors such as business strategies, cost management.