An Empirical Study On Dynamic Adjustment Of Capital Structure In Chinese Appliance Industry Listed Companies

As the cornerstone of modern corporate finance research, modern capital structure theory aims to identify a financing portfolio with the lowest cost when pursuing the maximization of enterprise value. Therefore, the capital structure can be optimized. Dynamic capital structure theory shows that target debt ratios varies as the change of macroeconomic and microeconomic condition, and firms deviate from their target debt ratio owing to information asymmetry and agency costs, so firms need continually adjust their actual capital structure to their target as the change of economic condition.Firstly, this article will review the overseas and domestic research status, and then it will introduce the characteristics of the appliance industry, the status of the capital structure of listed appliance industry, and analyze the macro and micro-factors of capital structure. Secondly, a dynamic adjustment model of capital structure is established, which will be tested empirically by the panel data of the listed appliance company from2004to2011. The empirical results show that the capital structure has positive correlations with collateral value of assets, credit scale and the development of stock markets, and has negative correlations with its profitability, product market competitiveness and non-debt tax shield, and growth, rate of GDP has no obvious correlation with capital structure. The absolute deviation of actual capital structure from the target capital structure has positive correlations with the previous asset-liability ratio and credit scale, and has negative correlations with product market competitiveness and collateral value of assets, and growth, profitability, non-debt tax shield has no obvious correlation with it. The adjustment speed of capital structure has positive correlations with credit scale and the development of stock markets, and has negative correlations with the absolute deviation of actual capital structure from the target capital structure, then the system cost is the major component of the adjustment costs. The average speed of adjustment of the capital structure is0.4511to the listed companies of China’s home appliance industry, it’s higher than the average level of China’s manufacturing industry, and lower than the U.S. listed companies’ average level of0.592from1990to1996, it shows that the listed appliance company has a relatively high speed of adjustment, but the cost is still high relative to developed countries. This article will make up the shortages existing in the static model and is more significant to analysis capital structure and adjustment speed in the view of the whole industrial level.