The Research On Governance Effect Of Capital Structure

The corporate is a operating platform which collect all kinds of contract. While theshareholders(owner), the capital investment from creditors are the fundamental guaranteesto the company running, which is closely related to the corporate governance and earningsdistribution. The financing contract between corporate and investors is connected with thestructure of corporate governance. Based on the background where real control had beenseparated from ownership, which put forward to new requirement to solving agencyrelationship problems. As the ratio of different kinds of capital that is of different contractcharacteristics, capital structure defines the balance of governance ability, which makescapital structure closely connected with developing corporate governance structure.Besides, as the rapid development of Chinese financing market, this kind of connection ismuch remarkable. Therefore, capital structure poses influence on corporate market value,by affecting the arrangement of property right and controlling right and the effect oftransfer of. controlling right.Using the manufacturing listed companies of stock markets of Shanghai andShenzhen from2010-2013as empirical research samples. This paper mainly talk abouthow the capital structure poses influence on corporate governance performance, byaffecting the arrangement of governance structure. Fist, this paper comprehensivelyintroduce the western capital structure theories systematically. After the integration ofviews from literature papers of western and China about the relationship between capitalstructure and governance structure、governance performance, and combined with theanalysis on how capital structure build connection with corporate market value underChinese special background of financing market where is of special institution and specialproperty right of corporate, this paper put forward that capital structure is playing animportant role in corporate governance in Chinese listed companies. And then, the researchhypotheses are put forward on how capital structure affects governance performance.In the empirical part, The research samples are divided into two groups charactered bythe characteristic of the lagest shareholder of every corporate, and the two kinds ofcharacteristic are state-owned and non-state-owned. Then, the paper designs two kinds of regression models to analyse the governance effect of capital structure of Chinese listedcorporate: One is about the relationship between ownership structure and corporateperformance, and the other is about the relationship between debt structure and corporateperformance. The results proved by the empirical test above show that the relationshipcoefficient between the share proportion of the fist shareholder, the dummy variablesdefined as general corporation, equity balance degree, the ratio of tradable share ofcompany and the variable defined as governance performance are significantly positive.However, the relationship coefficient between the debt ratio, the ratio of short-term debt,the dummy variable of state-owned characteristic, the degree of separation between realcontrol right and ownership right are significantly negatively, and the nature of naturalperson and overseas investors, the ratio of long-term debt have no significant influence ongovernance performance. So, capital structure affects governance performance by affectinggovernance structure indeed in China. The empirical evidence proves the relativeconcentration of pluralistic kinds of stock share which are well balanced into thegovernance structure is important to enhance operating performance. However, the softconstraint nature of long-tern debt makes debt contract not elaborate its governance effectit should be.Finally, related suggestion are put forward about how to optimize the governancestructure by adjusting capital structure.