Correlation Of The Western Private Equity Structure Of Listed Companies, Capital Structure And Profitability

After reform and opening-up, The status of private economy in Chinese economic is increasing. At present, the private economy has become an important part of our country’s economy. With the development of private enterprises, more and more private enterprises listed want to expand financing channels to solve the problem of money. Private listed companies are facing complex ownership structure, capital structure and governance structure. These structures play important role on the existence and development of Chinese private listed companies. Economic development strategy gradually transform from the west supporting the development of the east to vigorously promoting the development of the west. With the western economy promoting in the national economy, the development of western private listed companies also gradually become a focus of research for scholars. This paper is dedicated to study the correlation between ownership structure, capital structure and profitability in western private listed companies.The paper bases on the western private listed companies with normal operating during2003-2011, and uses literature analysis, descriptive statistics, principal component analysis and panel data analysis method. This paper studies the correlation between ownership structure, capital structure and profitability. Firstly, with literature analysis method study the domestic and foreign researches about the ownership structure, capital structure, profitability and form new idea on the basis of the understanding of his theory. Secondly, with descriptive statistics study Chinese private listed companies about region characteristics, industry characteristics and understand how important western private listed companies in Chinese private listed companies; To meet the needs of research in the paper, analyze ownership structure, capital structure, profitability of the western private listed companies and find the development problems and the restricting factors. Previous research about profitability evaluation have many controversies, mainly divided into the single index evaluation method and index evaluation method. Single index evaluation is not comprehensive to explaining profitability, This paper selects the multi-index evaluation method. This paper get comprehensive evaluation index with principal component analysis. Use interest-bearing debt ratio and interest-free debt ratio to measure the capital structure, at the same time use ownership restriction ratio and ownership concentration ratio to measure equity structure. The Classical evaluation index of Ownership concentration ratio is the sum of the top five shareholder’s stake. The classical evaluation index of Ownership restriction ratio is the proportion between the sum of the second largest shareholder to the fifth largest shareholders holds and the first big shareholder holds. To study dynamic response, the paper ultimately selects37western private listed companies with normal operation during2003-2011as samples with penal data model.The results show that Western private listed companies is applicable to equity restriction ratio which is promoted by western country. Because of special development environment and growth track, If the ownership restriction ratio is higher, the efficiency in operation will be higher, the profitability will be stronger. Ownership concentration ratio is higher,"free-rider" behavior of the other big shareholders is weaker, so the enthusiasm to supervise management will be higher and management efficiency will be higher, the profitability will be stronger.The relationship between Western private listed company’s capital structure and profitability serve the adverse selection theory, that is, the interest-bearing debt ratio is higher, investors will deem that the company is in good operating conditions, the more investors will provide investment funds for it, so profitability is stronger. Interest-free debt ratio is higher, investors will deem that the company is in good condition and with high credibility, the more investors will provide investment funds for it, so profitability will be higher.