Study On Capital Structure Of Listed Steel Companies In China

Since the creation of MM theory in the late1950s, the study of capital structurehas always been a hot spot in academia in which a series of important theoreticalachievements have been made. Research by many scholars reveals differences incapital structure among various industries. However there has not been much researchinto the capital structure of a particular industry, such as its present state, influencefactors and optimization. The steel industry in China, while reflecting the uniquecharacteristics of the industry itself, is also distinctively Chinese. With its rapiddevelopment, it also faces many challenges. Therefore, it is of significant importanceto make an in-depth study of the capital structure of the steel industry in China.In this paper we analyze the capital structure of listed steel companies in Chinafrom both theoretical and empirical perspectives. The study intends to highlight theuniqueness of Chinese steel companies in the context of the capital structure theorydevelopment both in China and abroad.In terms of theoretical research, we analyze the probable influence factors oncapital structure from both macro and micro perspectives. Our empirical research wasbased on the annual reports from44listed steel companies in2011. Our studyfocuses on micro influence factor analysis and selects9indexes to conduct multiplelinear regression modeling. We come to conclusion that there is significant positivecorrelation between capital structure and enterprise scale, between capital structureand liquid ratio. At the same time, there is significant negative correlation betweencapital structure and property liquidity, between capital structure and actual incomeand also between capital structure and non-debt tax shields.Based on our study, this paper provides some suggestions of optimizing capitalstructure from macro and micro aspects. Finally, we address the limitation of our workand suggest directions for future research.