Monetary Policy、Market Demand And Capital Structure

China’s exports and domestic demand has fallen since2007as being affected bythe US subprime mortgage crisis and the European debt crisis, it brought greatchallenges to the economic development and leaded the capital market to bust.Under such situation, the government issued a series of economy stimulus plans butwith adverse effects, such as excessive investment, the sharp rise in property pricesand high inflation, and so on. All of these effects have brought severe challenges tothe enterprises. How could the enterprise adjust capital structure effectively underthe macro monetary policy environment frequently change? This problem causes thethinking of the relationship between the monetary policy and capital structure.Based on the theory of Effective Demand and conduction mechanism ofmonetary policy, this paper discusses the effects of different monetary policytransmission mechanism on industry market demand and analyzes the mec hanismthat monetary policy affect capital structure with the market demand as theintermediary variable. The empirical results show that the monetary policy couldeffectively influence aggregate demand and market demand through interest rate,credit, asset prices and exchange rate. In the period of easy monetary policy, theincreases of market demand lead to the change of industry competition and further tothe change of capital structure due to profits increasing of enterprises and thetendency of more competitors into the industry. Results also show th at capitalstructure is positive correlated with the monetary policy and market demand, meansthat market demand as intermediary variable can transfer the effects of monetarypolicy to enterprises effectively, also verifies effects of factors such asmacroeconomic environment and tax rates on capital structure. Based on theresearch, we suggest that the monetary policy makers should consider the differencesin the effects of policy on the industry market demand. Business operators shouldconsider more about the monetary policy and other macro factors in the financingchoice to make the suitable judgment.