The Impact Of Chinese New Energy Companies’ Capital Structure On Corporate Performance

Capital structure is the outcome of company financing decision. As market economy, corporations and the research on corporations develops, people have realized that corporate capital structure further influences the economic stability and growth of a country or a region.The research of capital structure has been much focused since American economists Modigliani and Miller’s advanced the classic MM theory, and theoretical and empirical research findings become ever richer. However, no agreement has reached on the answers of these three questions and the answers differ. Considering the strategic emerging industries and limited capital supplement of new energy industry, it becomes vital for China and its new energy companies to explore how to choose capital structure in order to optimize corporate performance, albeit its limitations.First, after the review of the origin and development of capital structure theory and the research findings, this study finds its research questions and grounds, and also possible innovations. Then, starting from the concept of capital structure and corporate performance, this paper choosing listed new energy companies as the object of study, discusses how retained earnings, ownership structure and debt structure influences performance, on which three following hypotheses are grounded, making preparation for empirical model building. Meanwhile, the current situation of China’s listed new energy companies is analyzed by their capital structure and performance. In empirical study, based on the data and annual report from www.stockstar.com,130Chinese energy companies in A-share market of both Shanghai and Shenzhen Stock Exchange are selected. And a database covering390sets of panel data is built for multiple linear regression models. Software R is used for examination and results show asset-liability ratio is in an inverted U shape relationship with performance, with60%-80%asset-liability ratio resulting in a maximum performance, making plausible that market operation could exploit corporate performance. Corporate performance is significantly negatively correlated with the shareholding ratio of the largest shareholder and is positively correlated with the ratio of top10shareholders. As a result, it is suggested to be alert to improper control of management and decision-making by major shareholders and to maintain a multiple-player game and counterbalance by allocating corporate equity properly. Explanation is given on the incompatibility of the hypotheses and empirical results so as to modify original model and improve its explanatory power, which makes the adjusted model pass the test of significance. To verify reliability of the former empirical results,57companies whose new energy revenue ratio is low are excluded from the panel data. Examination of the remained73companies’data gives the same result as the one with all the companies, which shows again the empirical study is reliable. In the end, conclusion is drawn and suggestions are made.