Empirical Studies On Debt Financing Structure And Firm Value

Debt financing is one of a company's important financing decisions. Also it is a central issue in finance that how debt affects firm's value. Scholars of traditional finance theory, agential theory and information economy have done a lot of researches on debt's tax-free and financing leverage function, financial cost reduction and company's management improvement. These researches made us known a lot about how debt financing improves firm's value. However, these researches regarded debt as "the same kind". They neglected that debt of different maturity and from different creditors would influence firm's value in different ways. On the basis of theory and practical researches about debt managerial function home and abroad, and also considering China's listed companies' realistic status, the essay discusses the relationship of debt financing structure and manufacturing listed company' value. Under the perfect capital market environment, the value of company's stock market reflects its stock price, and the stock price's appreciation in a great measure is depend upon business performance of company on the market, from long-term, stock value of the company whose business performance is better is higher relatively, it is obvious that business performance of company and company value have an intimate relationship. As result, debt financing for action on corporate governance impacts the performance of company, from this point of view, the essay mostly researched that debt on corporate governance has on the value of company.The essay discusses this problem mainly in three parts. In the first part, we discuss the relationship between the overall debt level and firm's value. We choose asset-debt ratio to measure the debt level. In the second part, according to the different maturity, we divide the debt into long-term debt and short-term debt and discuss the relationship between debt maturity structure and firm's value. In the third part, according to the debt's different source, we divide the debt into commercial credit, bank loan and other debt (including salary payable, welfare payable and dividend payable) and discuss the relationship between debt type structure and firm's value. Meanwhile, considering that debt financing may influence firm's value differently in state-owned companies and non state-owned companies, the essay also divides the sample companies into two group according to the state-owned shares and further discusses the relationship between the overall debt level, debt maturity structure, debt type structure and firm's value.The essay chooses 430 A share manufacturing listed companies as sample companies and analyzes their 2001-2005 data with SPSS14.0. The regression results show that firstly, with the debt proportion becoming higher, the companies' business performance changes in "Converse-U" way, and the business performance is best when the debt proportion is around 30%; secondly, short-term debt produces negative effect on firms' performance, while long-term debt produces positive influence on firms' performance; thirdly, commercial credit and bank loan have negative influence on the companies' business performance, and the influence from commercial credit is more significant than that from bank loan. Other debt has positive effect on the firms' business performance. There are significant differences between state-owned and non state-owned companies about this problem.