Research On The Influence Of Interest Rate Liberalization On Capital Structure

Capital structure is a key in the company’s financial management. Studies have indicated that optimal capital structure can not only reduce enterprises’cost of capital, but also enable enterprises to maximize their value. Therefore, the choice of capital structure is critical for enterprises. However, managers’choice for financing depends on both company’s-own conditions and the influence of the macroeconomic environment. In recent years, interest rate play a more important role in macroeconomic with the interest rate liberalization, which increasing lots of the corporate’s financing environment changes. This condition is bound to affect the financing decision of enterprise managers. In this context, this article focuses on the relationship between interest rate market and corporate capital structure, and also we will make some recommendations for the conclusion. The research has an important reference value for market-oriented interest rate reform and capital structure adjustment.Firstly, we sort out previous studies from three aspects, including the interest rate marketization, capital structure determinants and the relationship between interest rate and capital structure, and we summarize some relevant arguments about interest rate and capital structure to extract study angle of this article. Thereafter, the paper describes evolution process of capital structure theory and the dynamic capital structure theory, and theoretically analyzes the mechanism of interest rates affecting capital structure from two angles of financing behavior and financing costs, which point out interest rate is an important factor for corporate capital structure, and lay a theoretical foundation for later empirical analysis. What’s more, we analyzed the change about our country’s interest rate after interest rate liberalization based on the interest rate market index, deposit or lending rate and other indicators. Then we analyze the characteristics of China’s listed companies’ capital structure using asset-liability ratio, current liabilities ratio and other indicators. On this basis, we summed up the relationship between interest rate liberalization and capital structure from the appearance. This thesis selected 533 listed companies as research samples, 2004-2013 data as observed value, building static and dynamic models for empirical test the impact of interest rate liberalization on capital structure. We innovatively divided the sample companies into 2 groups, the capital-intensive group and labor-intensive group, to compare the results.According to data analysis, we draw the following conclusions:First, the interest rate changes more apparently after the interest rate liberalization, showing a descend trend as a whole. Second, over the years, the level of debt of listed companies is relatively low, but the capital-intensive business’s assets debt ratio was significantly higher than labor-intensive enterprises’. Third, the interest rate liberalization increase listed company’s asset-liability ratio, and the impact on capital-intensive enterprise are more significant. Fourth, the interest rate liberalization speed up the adjustment speed of capital structure of the listed company, and labor-intensive enterprises’ speed of adjustment to target capital structure is faster than capital-intensive enterprises’ in the background of interest rate liberalization.Finally, this paper put forward some corresponding suggestions based on the research conclusions. In terms of interest rate liberalization reform, we should improve supporting measures and promote enterprise reform, etc. In the aspect of financing decisions and capital structure selection, we put forward different proposals for capital-intensive companies and labor-intensive enterprises that each enterprise should make full use of the financing advantages the current interest rate reform brings based on their own situation, making a reasonable choice of financing methods in order to reduce financing costs and improve corporate value.