The Impact Of Capital Structure On The Company Value

With the deepening of the financial system reform and the gradually increase of securities market opening, more and more foreign shareholders appeared in Chinese listed companies. Compared with the domestic enterprises, foreign companies generally have a more clear property rights, reasonable management organization and better economic efficiency. Whether foreign shareholders inject capital can bring advanced management experience, optimize the capital structure and thus improve corporate governance for our listed companies is a core issue to consider when listed companies make financing decisions. This paper tests the impact of capital structure on the company value, which is based on a comparison of foreign and non-foreign equity participating listed companies, in hope to provide a reference for how to optimize the capital structure and how to introduce foreign investment Scientifically of listed companies in China.This paper firstly reviews the correlative theoretical and empirical studies on the impact of capital structure on the company value and the impact of foreign equity participation on the company value. Based on the previous results and combined with the current market environment in China, we analyze the impact of capital structure on the company value and the differences between foreign and non-foreign equity participating listed companies, including the equity ratio, the ownership concentration and the debt maturity structure, then, this paper develops our hypotheses. This paper selects the companies that the first ten greatest shareholders contain foreign shareholders or the companies contain qualified foreign institutional investors as the samples of foreign equity participating listed companies. And in accordance with the principles of the main business, the size of the assets and the market year, we match the similar non-foreign equity participating listed companies. Through building multiple linear regression equation, this paper takes A-share Manufacturing companies listed on the Shanghai and Shenzhen stock exchange during the period 2011 through 2013 as objects and tests the impact of capital structure on the company value, which is based on a comparison of foreign and non-foreign equity participating listed companies. The results show that: The equity ratio is negatively correlated with the company value, and the impact on foreign equity participating listed companies is greater than on non-foreign equity participating listed companies; The ownership concentration is negatively correlated with the company value, and the impact on foreign equity participating listed companies is greater than on non-foreign equity participating listed companies; The current debt ratio has no significant correlation with the foreign and non-foreign equity participating company value. From the research results, the article holds, in our current environment, fully developing securities market, implementing Bankruptcy Law and other laws and regulations, reasonable matching long-term debt and short-term debt and appropriately reducing the concentration of ownership is more conducive to enhance corporate value. While foreign investors have speculative behavior, they also applied against predatory behavior when injecting capital into listed companies, the positive effect on Chinese listed companies is limited. Therefore, the Foreign Investment Law Should be further improved,and Chinese listed companies should pay attention to the introduction of foreign investment, focus on screening and introduce the strategic cooperation partners.