Capital Structures Of Financial Leasing Companies And Firm Values

The impact of capital structure on firm value has been widely followed and discussed by academics since the 1950s.Academics have developed many classical capital structure theories such as MM theory,trade-off theory and agency theory,which have become one of the core topics of contemporary corporate finance theory and financial theory research.However,the main conclusions of these theories are different and the the empirical evidences are inconsistent,which is greatly related to the characteristics of the industries.The high asset-liability ratio in the financial leasing industry has always been one of the concerns for corporate managers,regulators and investors,which is an important characteristic of the industry.This paper uses this fact to test theories related to capital structure and firm value through a regression analysis of the financial leasing industry in order to provide a factual basis for a deeper understanding of the theory.This paper performs regression analysis using panel data and fixed-effect model by collecting financial informations from 64 financial leasing companies in China from 2018 to 2020.The results found that there is a causal effect between capital structure and firm value of financial leasing enterprises and higher the asset-liability ratio,the greater the firm values.In terms of mechanism,this paper argues that capital structure affects firm value through the operating expenses.This finding also indirectly proves that debt interest has a tax shield effect.Also,this paper conducts sub-sample regressions for financial leasing companies with the others.The study found that the role of capital structures on firm values is heterogeneous,and the play of this role is more pronounced in financial leasing companies.Finally,this paper uses EVA to replace the ROE,and the results demonstrate that the effect of capital structure on firm value is robust to different measures of firm value.Compared with the established literatures,this paper selects financial leasing industry for the first time as an entry point to study the impact of capital structure on firm value and provides relevant evidence on the transmission mechanism.To a certain extent,it enriches the empirical research literature by supplementing the empirical evidence of related theories and provides additional factual basis for the theories.