Empirical Study On The Relationship Between Capital Structure And Financial Performance Of Listed Companies In Pharmaceutical Manufacturing Industry

Nowadays, it is a theoretical and practical study that the capital structure has a great effect on firm performance,which is a research of financial theoretical at home and abroad.The selection of capital structure is very important, it affects not only the cost of capital but also the financial performance of enterprises to a certain extent, which ultimately has a great impact on the value of the company. At present, it is necessary to analysis the relationship between the capital structure and the financial performance of the listed companies in pharmaceutical manufacturing industry in China, on the contrary, many studies are easily obtained about the capital structure and the financial performance but few studies on the relationship of them.So does the capital structure of the listed companies in pharmaceutical manufacturing industry affect its financial performance? If it works, how does it? In this paper, we find out the variable of capital structure which has a significant impact on financial performance of China’s listed companies in pharmaceutical manufacturing industry, make recommendations to optimize the capital structure of it and finally improve the financial performance.It firstly describes the theory of capital structure in different periods and financial performance,defines the concept in the study and points out the eleven traditional indicators of financial performance and one indicator which is R&D capability to reflect the financial performance of listed companies in pharmaceutical manufacturing industry. Secondly, according to the development status and industry characteristics of it, I select financial data in the annual report from2008to2010,make an analysis of its capital structure and financial performance and then get a composite score factor Y which use the method of factor analysis to reduce the dimension of twelve indicators and regression analysis between the capital structure and the composite score of factor. At last we draw a conclusions that the financial performance has a significant negative correlation with the asset-liability ratio, Non-correlated relationship with the first major shareholders shareholding ratio with the top ten shareholders of ratio, a positive correlation with top ten shareholders ratio and exists the quadratic curve with asset-liability ratio but not inverted-U relationship. Finally, based on the analysis of the results of the study, we put forward some policy suggestions to optimize the capital structure of the listed companies in pharmaceutical manufacturing industry, thereby enhance the company’s financial performance.