Study On The Impact Of Monetary Policy On The Capital Structure Dynamic Adjustment

Made in China 2015 points out that manufacturing industry is the foundation of the national economy and the only way leading to national prosperity is to build manufacturing industry with international competitiveness.Capital is the precondition for the establishment,sustainable operation and healthy development of enterprises.An internationally competitive manufacturing industry entails different types of capital support.Over the past years,the high sector leverage ratio and the rapid growth of the overall debt scale in China's enterprises have led to the increasing financial burden of enterprises.The business risks of enterprises have intensified against the backdrop of uncertain world economic prospects and bleak economic situation in China,which to some extent increases corporate debt risks,thus harming the healthy development of manufacturing industry.In order to deal with the external disadvantages,the government has put forward the five priority tasks—cutting overcapacity,reducing excess inventory,deleveraging,lowering costs,and strengthening areas of weakness,with deleveraging as the top priority.The idea of structured deleveraging has been proposed in the recent economic conference.However,over the past period of time,China's leverage rate has been rising moderately,while monetary policy has been prudent.Are there any internal links between them?Monetary authorities have repeatedly lowered the reserve requirement ratio since 2018.How does this change in monetary policy af-fect the deleveraging of manufacturing industry?Does the capital structure of manufacturing industry have structural problems and how should monetary policy be adjusted?This paper studies the impact of monetary policy on dynamic adjustment of capital structure by taking samples from the data of listed manufacturing companies.Previous studies on capital structure are mainly confined to the level of corporate characteristics and static capital structure.The measurement methods are usually fixed effect model with lag terms of explained variables,with no attention paid to the inconsistency of estimates within the dynamic panel model group,therefore the research results are not the most effective.This paper studies the impact of monetary policy on the dynamic adjustment of capital structure through such approaches as cluster analysis,aiming at providing academic guidance at the monetary level for China's structured de-leveraging policy based on the capital structure theory and the transmission mechanism of China's monetary policy.9864 observed values of unbalanced panel data are obtained from 1370 manufacturing listed companies from 2007 to 2017 through rigorous data sieving.This paper constructs a fixed-effect model at the micro-corporate level to verify the existence theory of optimal capital structure,and a dynamic panel data model including micro-corporate characteristics,monetary policy at the macro level,and the interaction linking them to study the impact of monetary policy on capital structure and the dynamic adjustment speed of capital structure on the basis of following the theoretical frameworkThe major conclusions are as follows:firstly,the capital structure of listed manufacturing companies in China follows the conclusions of trade-off theory,principal-agent theory,and so on.There is an optimal capital structure based on enterprise performance,explained by the inverted U-shaped relationship between capital structure and enterprise performance.Secondly,monetary policy is positively correlated with capital structure.The easier the monetary policy,the higher the capital structure.Thirdly,monetary policy is positively correlated with the speed of capital structure dynamic adjustment.The easier the monetary policy,the faster the adj ustment of capital structure of enterprises.The speed of capital structure dynamic adjustment of non-state-owned enterprises and low-leveraged enterprises will be faster than that of state-owned enterprises and high-leveraged enterprises under the same conditions.In addition,it is concluded through the analysis that the asset-liability ratio of most manufacturing enterprises in China is too high and the recent monetary policy is expected to have a negative impact on deleveraging.There are structural problems in the capital structure.The asset-liability ratio of state-owned enterprises is significantly higher than that of non-state-owned enterprises.Some enterprises can not make full use of leverage while the overall asset-liability ratio is too high.The robustness of empirical research is tested by narrowing the sample interval and replacing the proxy variables of explanatory variables after drawing the above conclusions.Finally,the following suggestions are made in the light of this paper:first,it is meaningful to pay attention to capital structure.Enterprise managers should pay attention to the asset-liability ratio to judge the position relationship between the asset-liability ratio and the optimal capital structure.Secondly,the general keynote is to implement prudent monetary policy.Thirdly,it is urgent to reduce the asset-liability ratio of state-owned enterprises,focus on improving the effectiveness of monetary policy transmission in state-owned enterprises.Fourthly,non-state-owned enterprises with low leverage can still use leverage,and monetary policy should favor them.Fifth,the implementation of structural monetary policy should be promoted to move forward with structural deleveraging.Due to the limitation of space and knowledge,this paper has not extended to price currency,the whole industry,time effect and other issues.The relevant content will be further studied in the future.