Impect Of Non-Financial Stakeholders On Choice Of Capital Structure

A new literature that linking capital structure and factor-product markets has been under focus in the last few years is the takeholder theory of capital structure. The basic idea here is affected by firm’s non-financial stakeholders as there are implicit contrasts and specific investments. Titman (1984) is the first to find that non-financial stakeholders (customers, suppliers and employees) pass on their expected liqudation costs to the firm. And firm can influence the probability of liquidation by choosing an appropriate capital structure. Other studies have argued that the bargaining power of non-financial stakeholders (NFS) may also impact on financing decisions.This paper investigates a sample of the324listed companies in2009, and studies the effect of non-financial stakeholders on capital structure by using non-parametric tests, ordinary least squares regressions, and so on. Some significant evidences were found:(1) the liqudation costs of non-financial stakeholders and the bargaing power of customers have no significant influence on the companies’capital structure.(2) the bargaing power of suppliers and employees have a significant influence on the companies’capital structure, and the companies’debet levels will be lower when the bargaing power of suppliers and employees is strong.(3) the companies may use the capital structure as a effective tool to attract non-financial stakeholders make more specific investments.According to the results of the empirical analysis, I found few Chinese companies considering non-financial stakeholders when they made the financing decisions, but taking into account the non-financial stakeholders to be necessary for each large company.