Research On Effect Of Interests Rate On The Capital Structure

Choosing the optimal capital structure is the core part of the companys’ financialmanagement in market economy.The companies should not only consider the internalfactors, but also consider the impact of macro-economic changes in making decisionof capital structure.The number of manufacturing companies in China accounting forabove half of the total number of listed companies, is a pillar of strength of China’seconomy, thus should pay more attention to macroeconomic factors, especially theeffects of interest rates on capital structure.This paper applies normative research and empirical research methods, and it isqualitative and quantitative to analyze impact of the interest rate on capital structure,by using the data of manufacturing listed companies as samples. Firstly, it reviewsrelevant theoryies of the interest rate and capital structure. Then, analyses interest ratepolicy and uses the theory of interest rate to to analyze the status of the interest rateand determin the actual loan interest rate. it also does comparative analysis in status ofcapital structure between China’s A share listed companies in manufacturing industryand A-share listed companies in our country to prepare for the empirical research.On this basis, it combines with the characteristics of China’s manufacturingenterprises to propose hypotheses, and selects some indicators having an importantimpact on capital structure as variables. This paper chooses363manufacturing listedcompanies as the research sample, which got listed before2000in Shenzhen StockExchange and the Shanghai Stock Exchange. And builds static and dynamic modelsfor empirical research according to the sample companies’2000-2009annual reports,then gets conclusions and puts forward the related proposal.Through theoretical analysis and empirical research, this paper obtains thefollowing conclusions:(1)The capital structure of manufacturing listed company is unreasonable. It has many problem such as the preference of exogenous financing, the total debt ratio islow and the level of current liabilities is high and so on.(2)There is a significantly positive correlation between short-term interest rate (6month actual interest rates on loan) and total assets-liability ratio; There is asignificantly negative correlation between long-term interest rate (3-5year actualinterest rates on loan) and total assets-liability ratio.(3)Current liabilities is much more sensitive to the interest rates changing, andthe reaction of long-term liabilities is relatively slow to the interest rate, resulting inthe sensitivity of total liabilities to interest rate is lower than current liabilities.(4)Compared with similar studies abroad, the relevance of actual interest rate onloan and the capital structure of manufacturing listed companies is lower than therelationship in foreign enterprises between the two.The innovation of this study is mainly reflected in the following two aspects: oneis that selecting manufacturing companies to study the impact of interest rate on thecapital structure. Manufacturing listed company is the basis and pillar of nationaleconomic development, and its healthy and steady development is very importment tonational economy, so selecting manufacturing companies to study the impact ofinterest rate on the capital structure has more Practical significance. Two is to carryout dynamic analysis. Considering the capital structure is the result of long-termdecision making, this paper also has the dynamic analysis in a certain period of time,and uses the GMM method to estimate dynamic model.