| As the core part of corporate finance, capital structure has being a hot topic in academic areas.Since the MM theory was proposed in1958, the theories related to capital structure and firm valuehave been generally accepted, but how capital structure affects firm value are still debatable. Somescholars attribute this arguable phenomenon to the complex mechanism. They think that capitalstructure has different effects on firm value to different kinds of corporate. Thereby, this thesisintroduces life cycle theories, trying to divide the companies according to life cycle period in order toanalyze the relationships between capital structure and firm value in different life cycle periods.The thesis starts from the development of capital structure theories, analyzing specifically aboutthe mechanism of how capital structure can affect firm value, then it makes comparisons about themeasure-methods of firm value, building an index system according to the Discounted CashFlow method to weigh companies’ value. The thesis chooses367companies listed before2005,dividing them to three categories which are the growth stage, the mature stage, the decline stage,using industrial economics periodic classification. Subsequently, two steps of empirical analysis aremade. The first step is the descriptive statistics on capital structure’s distribution of companies indifferent life cycle phases. The second step is regression analysis to study the relationship betweencapital structure and firm value in different life cycle phases. The empirical research result is thatcapital structure levels that the companies choose in different life cycle phases are obviously different,while the relationships between capital structure and firm value in different life cycle phases are thesame correlation which is negative.At the end, the thesis proposes some advice to optimize capital structure from boththe macroscopic angle and the microscopic angle in order to improve firm value. |
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