A Study On Debt Financing And Business Performance Of Environmental Protection Industry

The environment is indispensable for human survival and social development. We must develop the environmental protection industry to achieve the coordination of economic development and environmental resources for China is facing with the contradictions of economic development and environmental pollution. As a sunrise industry in the21st century, environmental protection industry can improve the quality of economic growth, create new economic growth points, provide more employment opportunities and drive the development of other sectors. For some reasons, such as over-reliance on government, insufficient corporate to participate in and the market mechanism has not been established, environmental protection industry is facing the "capital gap" and "debt financing gap". Because of the industry characteristics, that is large initial investment, length project recovery period and uncertainty gains, capital structure especially the debt financing is important for the development of the environmental protection industry. Promoting the development of the environmental protection industry in our country not only on the experience from abroad, but also should be combined with the actual situation to analysis how debt financing impact on the development of the environmental protection industry.Debt financing is an important part of the capital structure, different debt levels and debt maturity structures actually impact on corporate governance, and it is a central issue in finance that how debt affects firm’s value. The main purpose of empirical study in this thesis is that combined with the characteristic and developing stage of the environmental protection industry to improve the business performance and provide advices for the future development through analysis on how debt financing impact on business performance.This paper reviews correlative theoretical and empirical literature on debt financing and business performance. Based on thirty-five environmental protection listed companies data from2005to2010for the sample data, analyzes systematically characters of debt financing. This thesis uses SPSS to a series of relevant indicators reflected business performance for factor analysis and obtains the comprehensive factor, then takes this comprehensive factor as explained variable and some capital structure indicators as explanatory variable, applies SPSS to regression analysis for selected indicators. This paper can test whether environmental protection listed companies have significant characteristics by contrast with coal and fossil oil listed companies on debt levels, debt maturity structures, business performance and empirical study. Four main conclusions are ultimately obtained. Firstly, the debt levels and debt maturity structures of environmental protection listed companies are growing and similar with the coal and fossil oil listed companies. Secondly, the operating capacity and comprehensive factor of environmental protection listed are significant difference with coal and fossil oil listed companies. Thirdly, it is negative correlation between the asset-liability ratio and the business performance of the sample company; long-term debt ratio and the ratio of largest shareholders have a positive correlation with business performance; the ratio of negotiable shares and operating income growth rate have no significant correlation with business performance. Fourth, environmental protection listed companies are significant difference with coal and fossil oil listed companies on debt maturity structures and operating income growth rate and the ratio of largest shareholders impact on business performance. By the analysis of the empirical research and development status of the environmental protection industry, we can provide advices for the future development through internal environment and external environment:optimizing debt levels and debt maturity structures, raising the largest shareholders; strengthening government, expanding financing channels, improving laws and regulations and raising technology level.