Financing Structure And Corporate Performance

On March 23,US President Trump signed a memorandum to impose tariffs on Chinese goods worth US$60 billion.The list of goods related to the machinery industry mainly includes high-performance medical machinery,agricultural machinery equipment,industrial robots and high-speed rail equipment.Once punitive tariffs are implemented,they will certainly have a certain impact on the export of China's machinery and equipment and will even curb the recovery momentum of the equipment manufacturing industry.This article found that China's manufacturing industry has some problems such as small-operating-income,weak-profitability,high-financial-leverage and over-reliance on government subsidies.In order to solve these problems,the country has formulated a "Made in China 2025" plan and adopted a series of policy guidelines that focus on improving the financing of manufacturing,and on the fact that resources cannot be reasonably allocated.From the perspective of listed companies,financing channels can be divided into two major categories:endogenous financing and exogenous financing.This paper takes the relationship between financing structure and corporate performance as a starting point,conducts empirical research on the proportion of endogenous financing,exogenous financing,government subsidies and performance from 194 listed companies in the machinery industry from 2014 to 2016,aiming to explore whether the different source of funds has an effect on the value of the company and whether the differences in the financing structure have different effects on the state-controlled listed companies and on the private listed companies.Thus,the company's management,financial institutions,and government agencies can get some advice when formulating financing plans,approving loans and formulating policies.According to the empirical results,the financing rate of retained earnings has a significant positive impact on corporate performance;Short-term bank loan financing rate has a negative impact on state-owned enterprises and a positive impact on private enterprises;Equity financing rate is only significantly positive with private enterprise performance.Relevantly,the government subsidy rate is only significantly positively related to the performance of SOEs.However,the long-term borrowing rate and the bond financing ratio may not be significantly conclusive due to the small number of sample periods.From the results,this paper puts forward the following suggestions:For listed companies,efforts should be made to increase the proportion of inward financing,continuously enrich and expand financing methods,and establish a good cooperative relationship with banks.For the government sector,it is necessary to accelerate the marketization of the banking industry and increase the efficacy of government subsidies.