The Study Of The Relationship Of The Capital, The Level Of Output And The Company Type

Capital structure theory is one of the most bewildering theories of financeresearch field. Based on the enterprise value maximization or the goal of maximizingshareholder wealth, the theory focus on how the changing of the capital structureeffect the total value of the enterprise, trying to find a most suitable modes or tools offinancing. Predecessors have studied the issue from multiple angles. Here we choosean angle-signaling model-to study the capital structure of listed companies inChina.It is a very important issue of research in microeconomics to make decision ofthe company’s output level and get an optimal level of output. The output levelsmeans creating a variety of useful goods or services in the process of production,which includes the tangible goods and the intangible services supplied by producers tothe community. They can be used for consumption or for further production. Todetermine an optimal level of output, we should not only consider the company’s ownfactors, such as the cost,raw materials, technology and labor, but also consider theimpact of the other company’s decisions of level of output. Because the output level ofthe whole industry will affect the price, bring a further effect on the company’searnings level.If only considering from the point of view of economics, due to the existence ofcompetitive factors, the managers can not obtain the other company’s information oninternal, including output decisions. Then, in the face of the output decisions,company managers can only consider from their own point of view, which is likely tolead to its final level of output decisions at a suboptimal level. To solve this problem,this paper tries to consider the two problems together, one coming from economy andthe other coming from finance. That is to say, we try to combine the capital structuredecisions, the output level of decision and the type of company together, or combinethe capital markets and the output markets together, with the purpose of makingdecisions to achieve an optimal level of decision-making and the level of output.Firstly，the paper analyze the relationship between a company’s capital structureand its type from the angle of Signaling. Then we analyze the relationship betweenthe output levels of the company and its type, followed by an empirical study aboutChina’s listed companies based on the proposed model. The empirical results show that the relationship between the asset-liability ratio and its type is negative, so do therelationship between the level of output and its type, while the conclusion from ourtheoretical model proposed is inconsistent. In other words, the capital structure andthe output decisions both not reach the optimal level. To this end, this paper analyzesthe reasons and put forward policy recommendations.