An Empirical Study On The Effect Of Financial Leverage And Ownership Concentration On Corporate Performance

The supply-side reform with the theme of "three go,one drop,one supplement"was proposed on the 18th CPC National Congress.And on the 19th CPC National Congress,it also stressed the importance of supply-side structural reform,and it pointed out that we need to promote quality change in economic development,efficiency change,dynamic reform and increase total factor productivity.As the main body of the market,the listed company is also the main force of economic development,which has some problems such as rising production costs,inefficient marginal use of funds,unmatched consumption supply market,high leverage ratio,unreasonable governance structure and so on.So it is necessary to optimize the internal governance structure of listed companies and respond positively to the supply-side reform with the theme of "three go,one drop,one supplement".This paper firstly reviews the previous studies,and uses trade-off theory,two-power separation theory,agency cost theory and incomplete contract theory as the theoretical basis to analyze the influence of listed companies' financial leverage and equity concentration on company performance,and then puts forward the research hypotheses of this paper.Under the premise of theoretical analysis,this paper selects the financial data of the overall sample and manufacturing sample of the A-share listed companies in Shanghai Stock Exchange from 2012 to 2016 for statistical analysis and empirical research,and finally provides optimization suggestions from the perspective of corporate governance based on the research conclusions.Through the description of the basic characteristics of the overall sample and manufacturing sample of listed companies,the following conclusions are drawn:(1)The asset-liability ratios of the overall sample and the manufacturing sample were generally high,and the ratio of current liabilities was significantly higher than the long-term debt ratio.(2)The share ratios of the largest shareholder of the overall sample and manufacturing sample were generally high,and the shareholding distribution is relatively concentrated.(3)The trends of financial performance of the overall sample and the manufacturing sample were basically the same.It showed a straight downward trend from 2012 to 2015,the lowest in 2015 and picked up rapidly in 2016,and the manufacturing picked up more than the overall sample in 2016;the trends of market performance of overall sample and manufacturing were also basically the same,they showed an upward trend,and the market performance of manufacturing was above the average of the overall sample.Through the empirical analysis of the financial leverage,ownership concentration and corporate performance of the overall sample and manufacturing sample of listed companies,this paper draws consensus conclusions:(1)It shows a significant "U-shaped" curve relationship between the financial leverage and corporate performance of listed companies.As the asset-liability ratio increases,the corporate performance decreases first and then increases.(2)The ratio of current liabilities of listed companies is positively correlated with financial performance and has no significant correlation with market performance.(3)The long-term debt ratio of listed companies is significantly and negatively correlated with the corporate performance,the rise of the long-term debt ratio will cause the decline of corporate performance.(4)The share ratio of the largest shareholder of listed companies is significantly and negatively correlated with the performance of the company.The excessively high share ratio of the largest shareholder is not conducive to the improvement of corporate performance.(5)The Herfindahl index has a significant positive correlation with corporate performance,maintaining the proper concentration of ownership and allowing the remaining shareholders to participate in the company's business decision-making together,which is conducive to the improvement of corporate performance.Based on the above conclusions,this paper puts forward three suggestions on the optimization of financial leverage and ownership concentration from the perspective of corporate governance:choosing financial leverage reasonably and improving the debt maturity structure,adjusting the shareholding structure of the company and maintaining the proper concentration of equity,improving the capital market system and strengthening supervision.