Study On Economic Cycle And Dynamic Capital Structure

According to the theory of dynamic capital structure,the company has a target capital structure,and the target capital structure will adjust with the continuous changes in the internal and external environment of the enterprise.However,in the actual imperfect market,the external financing of the enterprise is not only cost-effective,but also available.At the same time,they are deeply affected by changes in the macroeconomic environment and changes in their own financing constraints.Based on the previous research,this paper chooses to analyze the dynamic adjustment of the company's capital structure from the perspective of the macroeconomic cycle and the company's own financing constraints.This article first summarizes the major theories of economic cycles and dynamic capital structure and makes corresponding empirical hypotheses.Then it constructs a partial adjustment model of dynamic capital structure and selects 593 Chinese non-financial listed companies from 1998 to 2016.the first time using the total capital structure measured by book value and market value,the net capital structure,and consider the long-term and short-term capital structure of the debt maturity structure as the explanatory variables to empirically analyze the relationship between economic cycle and dynamics capital structures.The main findings are as follows:First,the total capital structure has significant procyclicality,while the net capital structure has no significant cyclical relationship.It shows that the dynamic choice of the capital structure of China's listed companies does not conform to the preferential order financing theory,but it can be explained by the dynamic trade-off theory,time-varying collateral value theory and capital market-driven theory.Second,the dynamic changes in the capital structure of financing-constrained companies and non-financial-constrained companies are significantly different.The capital structure of the former is more counter-cyclical than the latter.This means that due to financing costs and refinancing risks,financing constrained companies are also reluctant to increase debt during the boom period,and are more difficult to enter the debt market during the recession period,and the financing constraints are even more serious.Third,the capital structure of state-owned enterprises are more countercyclical than private enterprises.This means that whether equity financing during the boom period or debt financing during the recession,private enterprises are far less able to obtain funds than state-owned enterprises.Fourth,the debt maturity structure is counter-cyclical.It shows that the debt maturity of a company is determined by the trade-off between the cost of extending short-term debt and the higher interest rate carried by long-term debt.Fifth,the total capital structure,the net capital structure,and the short-term capital structure,the speed of adjustment to the target level is faster in the boom period than in the recession period.Explain that due to the existence of adjustment costs,the adjustment of capital structure is asymmetric.