The Research On The Impact Of Credit Rating On The Capital Structure Of China’s Listed Companies

This paper attempts to analysis the impact of the credit rating on the capital structure of listed companies in China in the view of theoretical and empirical methods. After discussing the relation of optimal capital structure and credit rating from the perspective of principal-agent theory and shareholder value maximization, it came to the same conclusion, namely credit rating and optimal capital structure are related positively. However, the credit risk of companies in the same credit rating is also different because of the sketchy separation of credit rating. High-risk enterprise will tend to issue equity to avoid credit downgrade while low-risk enterprise will tend to issue equity to improve their credit rating. Only in the middle risk corporate will tend to issue bonds which is low-cost capital financing.The empirical analysis of China’s listed companies comes to the conclusion:capital structure of China’s listed company will be influenced by its credit rating. When credit rating increases, the company will tend to issue bonds. When credit rating downgrades, the company will also tend to issue bond. When the credit rating does not change with Z value changing, the top-third company will avoid issuing bonds expecting of increase of credit rating; the bottom-third company will also avoid issuing bonds in case of downgrading credit rating.The conclusions above prove that credit rating plays an important role in the establishment of enterprise system now. Even though the current sensitivity coefficient is still at a lower level, China’s listed companies will consider the change of credit rating when they make financing decisions.