| As one of the core issues of corporate finance, capital structure has been highly concerned by the academic community. In early studies, the static capital structure theory has always been dominant, but later with the development of econometrics, the dynamic capital structure theory began to obtain attention, and become hot topic of research in the field of capital structure in recent years. Western scholars started to explore in this area earlier, and achieved a large number of remarkable results. The domestic scholars have made some achievements on the basis of drawing lessons from foreign researches. These studies focus on the influence of characteristics of the company, the macroeconomic environment on the dynamic adjustment of capital structure, but give less attention to institutional background factors, the studies about the influence of financial development on capital structure adjustment are much less. However institutional factors play a very important role in capital structure decisions of Chinese enterprises. In the institutional factors, financial development is closely related with the financing environment of enterprises. Therefore, on the basis of existing research, this paper investigates the impacts of financial development on the dynamic adjustment of capital structure from two aspects which are the speed of adjustment and the degree of deviation by using a sample of A-share listed firms in Shenzhen Stock Exchange and Shanghai during 2005-2014, the results show that:(1) financial development can speed up the dynamic adjustment of capital structure of firms, and the higher the level of financial development become higher, the speed of capital structure adjustment become faster;(2) financial development can reduce the deviation between capital structure and target capital structure, and the higher the level of financial development, the lower the degree of deviation of actual capital structure and target capital structure. |
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