Research On The Debt Financing Of Capital Structure In Chinese Listed Companies

The option of Corporation financing methods, are essential for the determination of capital structure and improve the value of one corporate. The Ultimate goal of a corporation financing is to increase the marketing value of the organization, and the classic way to improve the value of one corporate is adjusting the capital structure.The capital structure is important for the financing cost, value, governing structure, competitiveness, development Potential and stability of the corporate, which are key reasons for it remains the most important issue in the realm of financing theory and practice. In the past few decades, the academia proposed and developed a lot of hypotheses and theories, and come to different conclusions, about the capital structure and corporate finance decision-making behaviors. The MM theory and revision theory were initially proposed by Modigliani and Miller, which laid a solid foundation for the modern capital structure theory. Since then, many scholars studied the capital structure theory from different angles, such as the trade-off theory, agency cost theory, signaling theory, the Pecking Order Theory of capital structure of the to study. They also studied the issue of debt financing.The separation of the ownership and management rights of the Modern joint-stock companies, resulted in inconsistent with the interests of owners and operators, thus appeared substitution, over-investment and underinvestment, and other issues, then resulted in agency costs. This article study the capital structure of listed companies in the debt financing from this perspective. According to the interpretation of agency theory, the debt can constrain the conflict between shareholders and management, then reduce the equity agency costs. However, the debt also have debt agency costs therefore, when we make financing decisions, must make trade-offs between equity financing and debt financing. In China,when the listed companies making financing decisions, they prefer to share financing, thinking the stock market as the primary way to obtain funds, last resort to consider debt financing. The importance of debt has been proved by many scholars in theory and practice, therefore, the debt is critical to improve the value of the company, which is a keynote of this paper. This article emphasis that the debt can reduce the agency costs of equity,also concerned the increased debt agency costs of debt; And trying to find the way to reduce agency costs of debt, from the factors which influence the agency cost of debt, then reduce agency costs and increase company value.In this paper, the research subject are agency costs and debt financing, and from the perspective of agency cost studied the debt financing of listed companies in a theoretical and empirical analysis. (1), It reviewed the related theories, the main theories of capital structure theory, agency cost theory, theory of the tax shield and the financial leverage and the managers act theory of constraints, lay a theoretical basis for the debt financing. (2), On the basis of reviewing the domestic and foreign theories, the paper analyze the importance of debt financing and agency costs with the relationship between the two types, confirme the introduction of debt reduce equity agency costs conclusions. (3), It also focuses on the relationship between agency costs and debt financing,and emphasis on restraint, signaling, and camera control, but also analyzes its shortcomings, which is the introduction of the debt agency costs of debt arising, such as, asset substitution and underinvestment; After analyzing the advantages and disadvantages of debt financing, the paper introduce a model to descript the agency costs of debt financing, and also use a simple empirical analysis to verify the conclusions of the model, the empirical results show that the agency costs of debt and equity is indeed negative related, and also related with debt agency costs. (4), Finally, it studied the debt financing of listed companies in China:first, analyze the financing situation of listed companies in China combined with data, the result shows that debt ratio of listed companies are low; Preference for external financing, preferred equity financing, the emphasis on debt financing is not enough; Use on short-term debt financing debt, the use of long-term debt is not high; In the choice of debt financing, emphasis on bank loans, the emphasis on the other ways of debt financing are not enough; On this basis, think of the current situation of the financing, analysis from the mobility, convenience and rationality of the structure of the different angles, to clarify his views. The next, select sample data of 843 listed companies in China from 2000-2009; Finance costs of debt to total debt ratio to measure the agency costs, select explanatory variables 7:company size, company size, debt maturity structure, financial flexibility, growth, profitability and debt level of the seven indicators,make brief analysis, propose corresponding assumptions; On this basis, make regression analysis by EVIEWS software, get to correlation function models. The empirical results show that the agency costs of debt and the company size, company size, debt maturity structure, financial flexibility and growth negatively correlated with profitability and debt levels are correlated with the previous hypothesis consistent. (5), on the empirical basis, proposes some suggestions:First of all, attention to the company’s own characteristics. When making debt financing, we should take into account their size, asset structure, profitability and other factors. In practice, should strengthen these indicators, through the rational allocation of resources to improve their competitiveness and promote the growth of corporate profitability, make the company bigger and stronger; Second, emphasis the integrate using of a variety of debt financing, to minimize agency costs. Such as the emphasis on long-term debt and short-term debt, in order to avoid face greater liquidity pressures cause by short-term debt. We Should also pay attention to a variety of ways financing methods, such as the commercial credit, bank loans, corporate bonds and financial leasing debt,to reduce the agency costs of debt; In addition, attention to the company’s debt financing, because the debt financing as the way to solve the company’s "internal control", working consumption, excessive investment, and have a significant meaning; Finally, should attention to the protected against creditors, making the creditors get the full sense of security, also can reduce the agency costs of debt. In addition, the paper also raised two policy recommendations of the bond market and the bankruptcy system.In this paper,we analyzes the role of debt financing and the agency costs arising from debt financing,on the basis of many scholar’s studies,and try to find the way to reduce agency costs of debt, so that make the utility of debt financing to a greater extent, make the capital structure of listed companies in China is more reasonable. From the agency cost perspective, especially the agency cost of debt to research the capital structure, provides a new theoretical support to the capital structure theory, also has a positive and realistic significance in regulating the financing behavior of listed companies in China, reduce agency costs of financing, guide reasonable financing policy.In this paper, there are many innovations:(1), research perspective aspects. Study the company’s debt financing from the agency cost especially from the agency cost of debt, is a relatively new research perspective. In recent years, although there are many scholars to study the problem of corporate capital structure from the perspective of the agency cost, but which was rare from the debt financing. (2), Empirical analysis. Although many scholars have confirmed that debt financing can reduce equity agency costs, but related to its empirical analysis. In this paper, by using the financial data from 2000-2009 of listed companies in China, we make the empirical analysis, and verify this conclusion. In addition, we also conducts an empirical analysis of factors which affect the cost of debt, to find the way to reduce the debt agency costs in practice. However, due to the rush of time and myself level of restrictions, there are still inadequate in many places, such as in conclusion part, which should also needs to be strengthened in the future learning.