A Study On The Relationship Between Debt Financing And Performance Of Manufacturing Enterprises In Guangdong Province

The manufacturing industry is an important part of the development of the national economy and it plays an important role in the economic growth.Guangdong Province is one of the leading manufacturing provinces and the provincial government has promulgated a series of policies to optimize the industrial structure in the manufacturing sector. In2012, the number of manufacturing corporations is287010in Guangdong province and the fixed asset investment is4923.4billion. Manufacturing growth has a considerable impact on the overall economic situation in Guangdong. In recent years, especially after the economic crisis of2008, manufacturing industry in Guangdong is faced with a lot of pressure such as inflation, RMB appreciation and industrial transformation. Therefore, China’s manufacturing industry needs to optimize the capital structure and strengthen enterprise management. Corporate finance is critical to manufacturing listed companies in China and debt financing as part of the financing also plays a very important role. Scholars have conducted a lot of studies on relationship between capital structure and performance of listed manufacturing companies. However, studies such as the relationship bettween debt financing and corporate performance of listed companies of manufacturing industry are still relatively few.The paper makes a comprehensive study on the domestic and foreign scholars’ results of capital structure and corporate performance. Combination of theory and empirical research methodologies has been applied and five years of financial data from2008to2012of49manufacturing listed companies of Guangdong Province are chosen as samples It makes a preliminary statistical analysis for selected five-year sample data through descriptive statistical methods. It outlines the main features of the sample variables through descriptive analysis of average value, maximum value, minimum value and the variance. Then, principal component analysis method is used to evaluate enterprise performance. Through combining the situation of listed manufacturing companies in Guangdong Province with related theories, the related hypotheses are made. Finally, corporate performance is set as the explained variable and asset-liability rates, bank borrowing rates and corporate business credit rates are set as the explanatory variables. Multivariate regression analysis method is used to test the relationship between the explained variable and the explanatory variables. The study shows that:1. Debt financing is dominated by short-term liabilities. Bank loans and trade credit are major sources of external financing of enterprises. 2. Business debt financing has not made funds more efficient because of tax avoidance to improve company performance;enterprise’s rates of assets and liabilities have a negative correlation with company’s performance.3. The study of term structure of the debt show that the company’s short-term debt rates and long-term debt rates have negative correlation with company performance.4. Study of source structure of debt show that bank lending rates have negative correlation with performance while business credit rates are positively correlated with performance.