The Correlation Between Capital Structure And Performance Of Listed Companies Of Manufacturing Industry In China

Capital structure is one of the focuses in academic researches. The ultimate goal tostudy the capital structure is to improve the corporate performance. In most of previousresearches, the corporate performance is considered as the financial performance, then, itincludes financial performance and non-financial performance. In modern economicenvironment, the market is complex and the competition between businesses is fierce, sothe non-financial performance plays an important role in long time competition.Therefore, the study on relation between capital structure and non-financial performanceis needed. As manufacturing companies in China accounted for half of the total listedcompanies, and they play dominated role in course of industrialization and economicdevelopment, so manufacturing companies are chose for study in this paper.Firstly, the corporate performance is divided into two aspects: financial performanceand non-financial performance. Secondly, the theoretic model on relation between twoaspects and capital structure is built. Finally, empirical model is found by statisticalanalysis and cases analysis. The research result of relation between capital structure andfinancial performance shows that: the correlation between tradable A-shares ratio andmarket value is not obvious; the correlation between equity ratio of the largestshareholder and market value is negative, then equity ratio of the largest shareholder andthe second largest shareholder are positive with ROE; the long-term debt ratio and theshort-term debt ratio are both negative to the financial performance. The research resultof relation between capital structure and non-financial performance shows that: either ofthe equity financing or the credit financing plays positive role in gaining corporate capital,improving corporate visibility, enhancing corporate reputation and promoting corporateto strengthen business management.