Relationship Between Capital Structure And Profitability On Environmental Listed Companies

The environmental enterprise is a kind of special economic entity whose development is closely related to the reduction and control of environmental pollution.Listed environmental companies have fairly good comprehensive capacity in the industry and their capital structure and profitability has been drawing large investors and the public.To Study the relationship of capital structure and corporate profitability, based upon capital structure theory and profitability theory, using the combination of theoretical and empirical methods, the paper has studied strong listed environmental companies in China. Taking the earning rate of net assets and profit rate of business as dependent variables, debt ratio of assets and debt ratio of long-term capital as the independent variables and selecting corresponding indices from scale, cash flow,qualify of earnings, growth capability and operating capability as controlling variables,with the help of stata 14.0, the study has conducted statistical analysis of 528 pieces of sample indices data of environmental companies within the time period from 2004 to 2014. The VIF analysis indicates that there are no serious multicollinearity problems among the variable indices, so the collinearity of the variables should not impact the result; Hausman test and BP test indicate that random effects model is appropriate for the selected sample data and fixed effects model could be used for robustness test; the linear-regression and robustness regression analysis of the related statistics confirms the hypothesis of the paper. The study of the sample data indicates that:(1) Both debt ratio of assets and earning rate of net assets pass the significance test when testing their correlation with profit rate of business, i.e. there is significant correlation between debt ratio of assets, earning rate of net assets and profit rate of business;(2) There is positive correlation between debt ratio of assets, earning rate of net assets and profit rate of business, which means the companies with higher debt ratio of assets have higher earning ate of net assets and profit rate of business;(3)Both long-term debt ratio of assets and earning rate of net assets pass the significancetest when testing their correlation with profit rate of business, i.e. there is significant correlation between long-term debt ratio of assets, earning rate of net assets and profit rate of business;(4) There is positive correlation between long-term debt ratio of assets, earning rate of net assets and profit rate of business, which means the companies with higher debt ratio of assets have higher earning ate of net assets and profit rate of business. Therefore, the suggestions of this paper can be concluded:rationalize capital structure and properly control debt ratio of assets; Improve enterprises asset management system and raise assets turnover rate; diversify fund-raising channels and develop bond market; perfect enterprises bankruptcy system and strengthen the creditors' control over the debt.This paper provides historical data for the rationalization of capital structure and enhancement of profitability of environmental enterprises, which, to a certain degree,can be a practical guidance to listed environmental companies on how to strength the comprehensive capability and sharpen their competitive edge.