The Impact Of Profitability On The Leverage Ratio Of Non-financial Enterprises

As China gradually enters the "new normal" stage,the structural problems caused by the rapid economic growth in the past 30 years have become prominent.In particular,whether the leverage ratio of non-financial enterprises is too high has become a hot topic among scholars.At the same time,with the emergence of Lewis turning point(the transition from unlimited supply to shortage of labor),the economic development process has shown many fundamental changes,the structure of factor endowment has changed,labor costs have risen rapidly,the characteristics of diminishing marginal capital returns have emerged,and the profitability of enterprises has entered a downward trend.In this paper,I established the dual economic model integrated with the change of corporate debt at the macro level,and theoretically discussed the influence of profitability on corporate leverage ratio and its influence mode.Besides,I used the GMM estimation method to verify the factors influencing the corporate leverage based on the non-financial corporate sector data from 1992 to 2015,and explained the change path of leverage ratio.The results showed that:(1)the profitability had significant negative effects on the leverage,(2)while the labor cost and total factor productivity had indirect effects on the leverage by influencing the productivity.At the same time,this paper also made a statistical analysis of the unbalanced panel data of A-share listed non-financial companies from 1998 to 2017 at the micro level.Based on the local adjustment model of capital structure,this paper used the dynamic GMM estimation method to test the relationship between profitability and enterprise leverage ratio,so as to understand that Whether there was structural features in the non-financial enterprise leverage and to further verify that whether the basic conclusions based on the general data of the non-financial sector can be supported by micro-data.The results showed:(1)productivity had significant negative impact on leverage ratio,it proved that,in terms of corporate profitability,the capital structure adjusting of listed companies followed Pecking theory,which showed the results show that the conclusions applied to macroeconomics are supported by the microcosmic data;(2)between 2005 and 2011,the estimated coefficient of productivity on leverage ratio was the largest;(3)the productivity of state-owned enterprises on leverage ratio was more obvious than that of private enterprises,and the negative effect on the leverage ratio in the declining stage of profitability is greater than that in the rising stage of profitability;(4)the companies in eastern region had the weakest impact on leverage,while the central region had the strongest impact on leverage.Based on the theoretical and empirical studies,I came the following basic conclusions:at the macro level,(1)after China entered 'lewis' turning point,the rapid change of labor supply and demand has improved labor cost,at the same time,the slow transfer speed of surplus labor force in rural areas lead to the decrease of the efficiency of resource allocation,which makes it difficult for enterprises to improve their production efficiency,these caused the decreasing of return on capital and lead to the rise of leverage in the non-financial corporate sector;(2)China's previous investment-driven growth model and the bank-dominated indirect financing system has lead Chinese enterprises have to rely on a large amount of liabilities to "stabilize growth and increase employment" when the return on capital declined,thus caused the enterprise to gradually embark on the high debt road;(3)the leverage of non-financial enterprises presents structural characteristics,the leverage of state-owned enterprises is higher than that of private enterprises and their profitability is lower than that of private enterprises,it mainly comes from the serious budget soft constraints of state-owned enterprises.;(4)enhancing the profitability of enterprises,and expanding the proportion of internal financing are the fundamental measure to reduce the debt ratio and prevent risks;(5)to reduce the leverage,we should focus on state-owned enterprises and enterprises in northeast China.In view of the above conclusions,I proposed the following countermeasures and suggestions:(1)transform the pattern of economic development,upgrade the industrial structure,improve the rate of return on capital,and defuse debt risks;(2)developing multi-level capital markets,promoting enterprises to transform their financing methods and optimize their debt structure;(3)continuing to promote supply-side structural reform and promoting the transformation of economic development from high-speed growth to high-quality growth model;(4)maintaining a tight monetary policy and strengthening financial supervision,so as to create a proper environment for reducing leverage ratio.