Dynamic Adjustment Model And Empirical Research On Capital Structure Of Chinese Listed Companies

Capital structure is mainly refers to the composition and proportion of thecompany’s various capital. In1958, Modigliani and Miller proposed the famous MMtheory,which is regarded as the cornerstone of modern capital structure theory, openscapital structure of the scientific research process. After half a century of development,has formed a relatively mature system of static theory of capital structure, and thedynamic capital structure theory and the empirical study also is in constantdevelopment and perfection, especially the dynamic adjustment of capital structure ofthe velocity at the core of dynamic capital structure problem, caused the scholars’study enthusiasm. At the same time, capital structure has been a core problem ofcompany’s management, which is helpful for company operation and management offinancing decision for the company, provides guidance significance in riskmanagement, directly affects the company’s capital cost and financing structure, and tomaximize the value of the company, therefore, capital structure is also become thefocus of managers.On the basis of dynamic capital structure theory, the theory of dynamicadjustment speed of capital structure and free cash flow’s influence on the dynamicadjustment mechanism have carried on the exhaustive elaboration and analysis, andbased on the traditional partial adjustment model, this paper have innovativedevelopment on the dynamic modle.One is the development in the asymmetry of thedynamic adjustment speed of capital structure. The other is that free cash flow as analternative variable of adjustment costs. To study dynamic adjustment speed of capitalstructure are making a big push.This paper chooses the relevant data of Chinese listed companies in2006-2011.The dynamic adjustment behavior of Chinese listed company capital structure areanalyzed and studied. The results were shown as follows. Firstly, target capitalstructure of Chinese listed companies is affected by size, asset tangibility, profitability,asset liquidity, growth, and the debt tax shield and other factors. Secondly, company’scapital structure adjustment behavior has active and passive adjustment behavior, andactive adjustment speed is faster than the speed which is estimated by traditional patialadjustment model. Thirdly, free cash flow is a suitable substitution variables toadjustment costs, but the positive and negative free cash flow have the same effect on the dynamic adjustment of capital structure behavior, the influence of capital structureadjustment speed is only related to the size of the absolute value of free cash flow, andhas nothing to do with the sign of the free cash flow. The last, dynamic adjustmentbehavior of capital structure exist significant asymmetry, the upward speed ofadjustmen is obviously faster than the downward adjustment speed. Therefore, thispaper not only provides guidance significance for the establishment of the companycapital structure dynamic optimization mechanism, but also can provide reference forthe government to perfect the capital market construction.