The Time Dependent And Endogeneity Of The Capital Structure Of Listed Companies In China

Capital structure has been considered as one of the highly focused issues in financial world since more than half century. Currently, studies on capital structure have gained abundant achievements. Both of the theoretical study and empirical study have proved the optimum enterprise capital structure. Also, these two research methods hold the opinion that the corporation value can be improved to a great extent by optimizing corporation capital structure. In the terms of affecting factors of capital structure, experts find that macro economy, the liquidity of assets, scale of company and profitability are the main determinants by analysing market data. However, all these research have a limitation. That is, they only concentrate on the impact of changing exogenous factors on capital structure rather than considering the dynamic of endogenous factors based on its own time series.As one of the establishing events in the enterprise development history, Initial Public Offerings have great impact on improving the condition of enterprise capital structure. Listing can greatly stimulate the company manager’s interest on investing. Meanwhile, the enhancements of the difficulty on obtaining information and brand effect give the listed companies broad prospects for development and various types of opportunities. This will whet the enterprise management appetite for further investments. Obviously, it indicates that there may exist certain rules of listed corporation’s capital structure selection.This paper aims at exploring whether listed corporation capital structure has time dependent and endogeneity after completing an initial public offering. The paper is based on panel data, using 1224 listed companies whose IPO date are during 2002 and 2012 as the sample. By choosing data between the first quarter of IPO and the third quarter of 2015 from the sample, this paper mainly investigates the time dependent and endogeneity of China’s listed firm capital structure. Also, it gives a theory to explain the reason why endogenous time dependent exists in listed companies in an economic way.The empirical results show that the relationship between capital structure and time presents a typical inverse U-shaped curve, which means company capital structure increased at first but soon declined. Even if we irrespective of the significant variables(liquidity, profitability, corporation uniqueness, development-opportunities, asset structure and scale of firm), the capital structure of listed company still subject to the time-varying regularity. Therefore, when chinese firms finish their initially public offering, the capital structure of them shows significant time dependent and significant endogeneity.According to the relevance theory and historical experience, this paper puts forward the following hypothesis: 1. the constraint of listing standards leads to pre-market’s relatively low capital structure; 2. listing stimulation makes the capital structure of listed enterprise improved significantly; 3. the high reputation of the listed corporation further increases its capital structure; 4. capital structure and enterprise value push each other to higher levels of listed company capital structure; 5. the depression of listing stimulation brings the capital structure down; 6.the balance between enterprise value and bankrupt risk further decreases capital structure. For the reasons given above, they make the capital structure of listed corporation rise significantly at first, however, when the capital structure goes up to a certain level, it starts to decline significantly. Additionally, the result of this paper provides both theoretical and data base a new view for future study on the changing rule of capital structure.