Financial Development, Capital Structure And Corporate Risk-Taking

The paper studies how capital structure and financial development influence corporate risk-taking and how financial development influences the relationship between capital structure and corporate risk-taking.First,the paper combs and analyzes relevant literature,and then systematically summarizes the main pathways of the capital structure and financial development influence on the corporate risk-taking,and capital structure positively influences corporate risk-taking by shareholder-creditor conflict and shareholder-manager conflict while financial development influence it by easing financing constraints.At the same time,financial development can reduce the positive influences of the capital structure on corporate risk taking by promoting the governance effect of debt and adjusting the financing channel of high risk project.Second,the paper use PCA on financial scale,financial structure and financial efficiency to construct a comprehensive index which can be used to measure the financial development level.Last,the paper takes listed manufacturing firms from 2004-2015 as sample to study the relationship among financial development,capital structure and corporate risk-taking by using System-GMM.The theoretical and empirical results show that capital structure and financial development both have positive effects on promoting corporate risk-taking for manufacturing industry.Moreover,there is substitution relation between capital structure and financial development which means that corporate risk-taking is less sensitive to capital structure if the region where the enterprises locate is under higher financial development level.