The Influence Of FDI On The Capital Structure Of Public Manufacturing Companies In China

Since the reform and opening up,foreign direct investment(FDI)continued to increase,as an important part of GDP,FDI has a significant role in promoting our economy.The introduction of FDI brings enough capital,advanced technology and management experience to Chinese enterprises.The research on the impact of FDI at the micro level is focused on technology spillovers,enterprise performance and innovation.Few scholars are concerned about the impact of FDI on corporate finance,especially corporate capital structure and its volatility.Based on the theory of capital structure,this paper makes an empirical study on the determinants of capital structure,and discusses the impact of FDI on capital structure and capital structure volatility.Some scholars have found that FDI can reduce the cost of external financing by "injecting capital" or "signal transmission function",and the decrease of external financing cost will help the enterprise get the capital and change the capital structure of the enterprise.At the same time,there are also studies show that financing constraints on the enterprise's capital structure fluctuations have a significant positive impact.Therefore,this paper studies the impact of FDI on corporate finance constraint at first.Then we study the impact of FDI on its capital structure and capital structure volatility by changing corporate finance constraints.In addition,according to the pecking order theory proposed by Myers and Majluf,the firm will use the internal funds firstly,and then use the foreign financing.FDI,an equity capital,provide a lot of money to the enterprise,which may reduce the external liabilities,then directly affect the enterprise's capital structure.Therefore,this paper also discusses the direct impact of FDI on corporate capital structure.Using STATA13.1 software to analyze the panel data from 2005 to 2015,the empirical results show that FDI has a significant negative impact on the financing constraints of the firm,and then the capital structure of the firm is significant positive impact indirectly.However,FDI has a significant negative impact on corporate capital structure and greater than indirect effects.So the combined effect of FDI on the capital structure of the firm is likely to be negative.This paper also finds that FDI has a significant negative impact on the volatility of corporate capital structure by reducing corporate financing constraints.In summary,the results of this paper show that FDI has a significant impact on the enterprise capital structure and its fluctuation,which is a factor that cannot be neglected in the enterprise financial management.This has a certain guiding significance to the enterprise financial management.The innovation of this paper is to explore the impact of FDI on corporate capital structure and its volatility by influencing corporate finance constraints,and use the comprehensive financing constraint index to study the impact of FDI on corporate financing constraints.The shortcomings of this paper is not the macro factors into the consideration,resulting in a certain deviation in the results.