Relationship Between The Nature Of Ownership And The Dynamic Adjustment Of Capital Structure

After the reform of share structure split in2006, the relationship among the state-ownedlisted companies, the government, the state-owned commercial banks is still exactly closely.Special institutional environment makes the listed companies exist serious agency problemsfrom managers and controlling shareholders, and also caused a significant differencebetween SOEs and non-SOEs in the financing environment, risk appetite and the function ofcorporate funds, and these differences has a significant impact on dynamic adjustment ofCapital Structure.There are voluminous literature about Capital Structure, recent studies are mostly studythe dynamic adjustment of the capital structure in terms of sources of funds, debt level ornature of ownership, respectively, there is little literature combined the three factors toexamine the intrinsic relationship between them and Capital Structure, so this trail followsthe former, try to let funding sources and debt levels as a basis for classification, the listedcompany will be divided into four categories, by using the two-way fixed effects to testsamples, investigating what role the nature of ownership played in the above fourcompanies recapitalization, and how it affects the optimize of Capital Structure.The results showed that when the enterprises which has similar levels of debt andsimilar source of funds adjusted the Capital Structure, the nature of ownership had a majorimpact in the adjustment process. Specifically, both in the low debt levels and high debtlevels, state-owned enterprises which depended on external funding adjusted the CapitalStructure more quickly than similar non-state-owned enterprises, in low debt levels,state-owned enterprises which has free cash flow adjusted the capital structure faster thansimilar the non-state-owned enterprises,but in high debt levels, there is no significantdifference in the speed of adjustment between state-owned enterprises which has free cashflow and similar non-state-owned enterprises.In this paper, the following conclusions: first, state-owned enterprises has a hugeadvantage on the external source of financing, its expansion preference is stronger, evenmore over-investment, resulting in a faster adjustment on the objective; second,non-state-owned enterprises prefer internal surplus to increase accumulation in order toadjust Capital Structure and the speed of adjustment is slow; third, the sense to optimize thecapital structure in Chinese enterprises is poor, mostly enterprises prefer seeking the interests of managers and controlling shareholders and have the passive adjustment. Theseproblems had adverse consequences in listed companies, especially state-owned enterprisesto optimize the capital structure, so the paper against above problems, giving some specificrecommendations from enterprise-level micro-level and institutional environment.Finally, the study of the dynamic adjustment of capital structure provides a newperspective, following research can make a further in-depth analysis, to understand whenenterprises which has different debt levels and different sources of financing dynamicallyadjust the capital structure, how does the nature of ownership affects the speed of adjustmentand capital structure optimization.