Financing Demand, Macro Constraints And Dynamic Adjustment Of Capital Structure

This paper mainly focuses on the capital structure issue of Chinese listed corporations under the transition economy. Based on the assumption that optimal capital structure exists, this paper analyzes the panel data of Chinese listed firms from2001to2010using dynamic adjustment model of capital structure. Different from previous research, this paper believes that optimal capital structure is determined by both firm-level characteristics and macro-financing environment. With a variable called financing demand, this paper successfully introduces macro-financing environment variables into the model, which ensures the reliability of our regression. Fixed effect regression shows that all firm-level characteristic variables affect capital structure adjustment significantly in addition to growth. Generally speaking, credit constraint variables of macro-financing environment indicators don’t influence capital structure adjustment very much. But the influence is negatively correlated with firm scale. On the contrary, equity financing constraint variables affect capital structure adjustment significantly on the level of both quantity and price.