An Empirical Study Of The Correlation Between Firm Value And Capital Structure

1958, Modigliani and Miller made MM theory, since then, about the company’s capital structure has become a hot research issue academia. However, MM theory is based on the premise of strict assumptions, where there is a big difference in a lot of theories, concluded with the company’s operating conditions. After that, each country on the basis of the researchers on the theory of gradual relaxation of assumptions, and gradually formed a trade-off theory, agency and corporate value associated with a range of theories of capital structure theory and signaling theory. These theories from different angles to analyze how capital structure affect the value of the company, the study shows the existence of a correlation between firm value and capital structure. Research the company’s capital structure is the key problems of modern corporate governance, it is reasonable or not will directly and the Company’s operations and the company’s earnings-related, and even affect the company’s future development plans. Pharmaceutical manufacturing industry is related to the national economy sectors. With the improvement of people’s living standards, the emergence of population aging and the deepening medical reform, its development is directly related to the masses to enjoy the level of medical care. Domestic researchers, research targeted at China’s pharmaceutical manufacturing industry listed companies is still relatively small, and therefore, it is necessary to study the correlation between the industry and the value of the company’s capital structure, revealing some of the problems that currently exist in the industry; for our pharmaceutical listed manufacturing companies financing options offer some suggestions, more conducive to the industry’s future development.For the correlation between the company’s capital structure and corporate value, scholars had a lot of discussion. There for the entire capital market, targeted a various industries, such as the real estate industry, IT industry, etc.; Because the sample as well as differences in the adoption of variables, the resulting correlation also exists a big difference. For listed companies in the pharmaceutical manufacturing industry is also less relevant studies, researchers had to Tobin’s q as the representative value of the company conducted a correlation study, the result is the value and relevance of the company’s capital structure is not significant. China’s pharmaceutical manufacturing industry listed companies can be divided into medicine, chemical, pharmaceutical and bio-pharmaceuticals, they do not have the capital structure of the classification and analysis of results for the characteristics of China’s pharmaceutical manufacturing industry listed companies; while for indicators to measure the value of the company is no different comparing the results of the analysis may not result in very accurate.This article, the first course for the development of the theory of capital structure for a simple comb. Including MM theory, Miller equilibrium theory, signaling theory, agency theory and the trade-off theory, these theories from different angles, a theoretical analysis of the correlation between the two Secondly, the " Listed Company Industry Classification Guidelines " as the standard, selected the66listed companies in the pharmaceutical manufacturing industry listed before2007. Listing of these listed companies to different locations, different product categories to classify each of their companies structural features, performance of the company and the state of the industry characteristics were analyzed and compared, the capital structure of the entire industry first increased and then decreased after his company the results showed a downward trend after the first rise; also found biopharmaceutical company listed on the lowest balance, and its ROE should be a lot higher than each of the other categories, China’s pharmaceutical manufacturing industry initial performance of listed companies and company balance rate showed a negative correlation. Then, create a regression model for empirical analysis of the correlation between firm value and capital structure. Select a Tobin q, ROE as a measure of company value, select asset-liability ratio as a measure of the company’s capital structure, while the number of companies selected for the size and growth of the company’s main business income as control variables. Before making model analysis for China’s pharmaceutical manufacturing industry listed company’s debt structure was simple analysis, we can see that the industry in the listed company’s liabilities, current liabilities are very high, long-term debt is very low, mainly through debt financing to meet current liabilities. Through the establishment of the two models, has been China’s pharmaceutical manufacturing industry listed company’s capital structure and corporate value correlation is more significant. Both showed a significant negative correlation, and the higher the debt ratio, the greater the value of the company.Conclusion of the study show that China’s pharmaceutical manufacturing industry value of listed companies and capital structure, showed a significant negative correlation. Also, the high debt levels of listed companies in the pharmaceutical manufacturing industry. Tobin’s q, capital gains rates with net gearing ratio significantly negative correlation. With the improvement of asset-liability ratio, Tobin’s q declining net assets yield declining lower value of the company. Meanwhile, China’s pharmaceutical manufacturing industry listed company’s value and the company’s growth-the main business revenue growth was positively correlated with the company’s growth accelerated, rising value of the company, with the rapid growth of the company, the company’s position in the market continued strong, increasing the company’s profitability and market valuation of the company. Listed companies in the pharmaceutical manufacturing sector debt financing structure, the high ratio of current liabilities, long-term debt is low. In the debt financing structure, high-current liabilities Long-term debt is very low, the company is mainly short-term debt financing liabilities. For current liabilities, companies not only need to pay interest periodically, also faces short-term pressure to be principal for the company’s normal operations have a big impact, not conducive to long-term development of the company, so to adjust the debt structure, due to increase long-term the proportion of liabilities.Although China’s listed companies with asset-liability ratio is low compared to the overall level, but empirical analysis shows that China’s pharmaceutical manufacturing industry listed company’s assets-liability ratio is higher, either ROE or the market value of Tobin’s q, all with the gradual decrease. In other words, the current overall asset-liability ratio is too high, it should reduce its gearing ratio, by increasing the proportion of the source of financing, such as issuing shares, reducing the payment of dividends and other measures to reduce the proportion of debt. Second, debt financing structure, current debt ratio is too high, the selected interval2008-2012are maintained at their basic level of over80%, high-current liabilities, first give the company a certain amount of financial risk that regularly payment of interest and repayment of principal and so on. Current liabilities are too high, the creditors are on their own financial security considerations for use of the funds raised will be some restrictions for the overall planning and development of the company is very unfavorable; therefore, should reduce its current debt ratio, due to increase long-term debt ratio.At present, China’s capital market development is relatively slow, and the money market, stock market and bond market development is also very uneven. Our money market, securities market matures, while the bond market because there are many problems to be solved stagnant. Many companies or the market itself because of its own limitations, can not issue corporate bonds, long-term debt financing. Meanwhile, the equity financing is a lot of restrictions, so these companies tend to only get short-term money market financing, which led to excessive current liabilities of enterprises. In view of the bond market problems, put forward some suggestions:First, to accelerate the reform of corporate bonds issued gradually administrative deregulation, reducing administrative intervention. Second, adjust the level of corporate bonds of varieties, improve its liquidity in the market. Third, improve our corporate credit rating system, and gradually improve market transparency in the corporate bond market, reducing market, information asymmetry between investors and companies, and gradually increase the credibility of the market, capital flows to guide the market, should gradually develop the insurance companies, pension funds and housing provident funds and other institutional investors. Fourth, the gradual improvement of the circulation of the bonds issued, do a secondary bond market effective docking, only both meet the financing needs of those funds, but also to protect the interests of investors, can long exist and develop.