Optimization Of BYD’s Capital Structure Based On Financial Contingency Theory

The capital structure of an enterprise is affected by its financing activities,investment activities and even operating activities,So capital structure is a reflection of various financial activities.The rationality of capital structure is related to business strategy,corporate value and sustainable development,so the problem of capital structure optimization has been a hot research issue.The theory of financial contingency can be summarized as "one goal,four dimensions",Sustainable development is the ultimate goal of capital structure optimization.The four dimensions are path-dependent factors,internal factors,external factors,and optimal capital structure,and these five dimensions are interlinked to form a comprehensive analysis system for studying capital structure optimization,therefore,it is of certain research significance and value to systematically study the optimization of capital structure of specific case companies by applying the theory of financial contingency.In this paper,BYD,a leading new energy vehicle company,is selected as the case company,and the financial contingency theory is taken as the main theoretical basis,On the basis of extensive study of domestic and foreign scholars’ research results,the paper thoroughly studies the financial contingency theory in capital structure optimization research,i the goal of the paper is to make an exploration and provide insight into the applied research of financial contingency theory and also to provide reference for BYD operators to optimize their capital structure.In terms of research ideas and methods,this paper focuses on the idea of "problem formulation-problem analysis-problem solving".The paper firstly sorts out the definitions of capital structure,capital structure optimization,financial contingency theory,and financial contingency theory system according to the boundary of concepts from inside to outside.Secondly,the paper selected BYD’s 2017-2021 data and five comparable companies in the same industry for cross-sectional and longitudinal analysis to summarize the problems of its capital structure and conclude that BYD’s capital structure needs to be optimized.Based again on the theory of financial variation,the paper analyzes the factors influencing BYD’s capital structure in three dimensions: path dependence,external factors,and internal factors in a comprehensive manner and the entropy weighting method is used to screen out the key influencing factors,and finally the optimal capital structure interval of BYD is measured as[43.2%,55.74%].Finally,optimization recommendations are proposed.These recommendations include increasing the proportion of equity financing to reduce the gearing ratio,adjusting the debt structure to enhance the soundness of corporate operations,creating diversified financing channels to expand the scale of financing,and improving the dividend policy to increase the proportion of endogenous financing.