Study On Asset Liquidity’s Effect On A Firm’s Capital Structure Of Chinese A-share Listed Companies

Different scholars hold various viewpoints as to the issue that how could asset liquidity effect on a firm’s capital structure, let alone papers adopting theory and demonstration method from microscopic about our nation’s public limited company are scanty. Thus this paper sets Chinese A-share Companies’ asset liquidity effect on capital structure as research perspective to explain the points by empirical tests.Through reviewing and generalizing the existing asset liquidity and capital structure related literature, the paper raises empirical research’s three hypotheses on the foundation of theory and Chinese listed companies’ specific present situation: asset liquidity effect on capital structure negative significantly and furtherly, the dynamic indicator of asset liquidity affect book leverage ratio more remarkable than market leverage ratio, and the illiquid assets effect on capital structure positive significantly. The empirical research selects Chinese A-share Companies’ annual data from 2002 to 2013 as the sample source. It set asset-liability ratio, market leverage ratio as capital structure’s substitution variables while quick ratio, dynamic cash generating speed as asset liquidity’s substitution variables. After that, multiple linear regression models are built with POLS, Fixed Effect and Quantile Regression to make empirical analysis about how asset liquidity affects capital structure. Subgroup regressions are also be done by distinguishing between SOE and non-SOE. The paper combines regression results with the theory to make an explanation and supported by robustness test.The empirical results support the null for Chinese A-share Companies. With that said asset liquidity’s increasing of listed companies will bring debt falling and short-term solvency improvement by reducing the leverage ratio.Finally by the regression simulation result, the paper puts forward countermeasures and policy suggestions from two dimensions of firm management and market regulation, as looking forward to make a contribution for further study and our A-share companies’ and market’s sustainable management and sustainable development.