The Influence Of Enterprise Diversification On Capital Structure

In the field of financial theory,capital structure is not a new problem.theory of capital structure include MM theory,optimal order financing theory,signal model and market selection theory,developing from static capital structure theory to dynamic capital structure theory.The research of capital structure has been flourishing,and the theory of capital structure is constantly combined with new fields.The essence of capital structure is abput the financing of enterprises,and it can be said that the movement of capital is the core of enterprises.With the development of economy,the evolving complex mechanism of money and credit and the constant innovation of financial products makes the operation mechanism of enterprise funds and the computation of the capital cost more complex.Just as Stephen Ross said,"capital structure theory is one of the most abstruse and difficult theories in the financial field".First of all,this paper reviews the development of the capital structure theory.Based on the empirical research of the classical static capital structure theory and the influencing factors of the company's capital structure,the paper identifies the explanatory variables and related control variables of the capital structure of a company,and then make a regression analysis to static capital structure.The empirical results confirm that the degree of corporate diversification,firm size,profitability and growth,corporate cash flow,corporate property rights,and macroeconomic factors have effect on corporate capital structure.Among them,the degree of corporate diversification is positively correlated with the corporate asset-liability ratio.Secondly,this paper reviews the development of dynamic capital structure theory in recent years.Most of the researches of dynamic capital structure theory focus on empirical analysis area.And the content of these research mainly focuses on the influencing factors and adjustment paths of the speed of corporate capital structure adjustment.This paper takes enterprise diversification as a starting point.Using the two-stage partial adjustment model for reference,we use the gap between the estimated target capital structure the actual capital structure of the company and the estimated Herfindahl index and their cross terms to regress the range of adjustment of the company's capital structure.The regression results indicate that the diversification of the enterprise have a positive effect on the adjustment of the target capital structure.Finally,although the Herfindahl index is often used as a measure of corporate diversification,the Herfindahl index has some limitations,including the inability to further reflect the relevance of diversified businesses,And when a certain business operation make a loss,which means that the operating income is negative,the Herfindahl index can't be applied,so this part of the sample was removed,which result the limitations of the conclusions of this paper.