China’s Listed Companies’ Financial Leverage’s Effect On The Stock Compensation

With the rapid development of our economy, more and more enterprises to choose theexpanded scale, development and growth, raising funds became the primary task of theenterprises in our country. In the face of diversified financing ways, debt financing and equityfinancing has been widely concerned, the proportion of them therefore becomes the focus ofthe country’s each enterprise and scholars. In foreign developed countries, financial leverageresearch has been mature and has been applied to various companies, and their own capitalhas become less and less. Because China’s economy started late, the market economy is notperfect, so leverage’s attention and research is relatively backward, not for Chinese enterprisesto provide certain theoretical guidance.This paper first introduces the capital structure theory and the theory of financialleverage, financial leverage research of the Chinese and foreign scholars, and finds theresearch emphasis and hot spot of financial leverage, and carries on the certain supplementaryand analysis. About financial leverage，This paper mainly focus on the study of the relation offinancial leverage and shareholders’ equity reward. The perfection of the capital market, thelisted company shall be subject to become the main force of China’s economy, and financialmanagement goal is to maximize shareholder value, that is to say, to achieve the companyshareholders’ equity pay increase is every enterprise development power. Therefore, researchon the relation of the financial leverage and shareholders’ equity reward is indispensable. In aforeign country, financial leverage is divided into book leverage and market leverage byscholars, respectively through the source of the company funds and the company’s stock levelto analysis the influence of the remuneration of Stockholders’ equity. However, China’seconomic environment is different from, so is the influence factors of financial leverage sameto foreign countries? In China, do capital source and the discretion of the share price willinfluence shareholders’ equity? Therefore, when this paper studies the relation of bookleverage and shareholders’ equity reward, also joins the relationship between the marketleverage and the equity compensation.Meanwhile, before studying the effect of financial leverage for stock compensation, firstanalyze the factors that influence the financial leverage,through which further understandingfinancial leverage, and better analyzing the impact on equity.Through the study of financial leverage, our listed country can reasonably apply financialleverage, and improve the company performance, then improve the shareholders’ equitycompensation.