The Study On Capital Structure Of China Listed Companies

The average ratio of asset-debt in China listed companies shows itself in the trend of increasing year by year from 1998. The study on the new problem is helpful to understand China listed companies' choice of capital structure, regulate financial behavior and buildup the ability of competition.The scholars in China always study the choice of capital structure on the characteristics of the firm, and almost of them lose sight of the product market competition and the financial market that the firms face on production and operation. Chinese firm's production market competition becomes more intensive and more intensive, along with the transformation from seller's market to buyer's market. The change in competition will influence listed companies' production and operation, and cash flow, at last, capital structure. One of the preconditions of foreign theory on capital structure is that the debt is a hard budget constraint, i.e. if the firm could not pay the debt, it would be bankrupt. But in China, the debt is soft budget constraint. The listed companies will expect the situation, so they will increase the level of debt.The paper studies the capital structure of China listed companies on the aspect of product market competition and debt soft budget constraint, not on the aspect of agential cost, non-symmetric information and corporation governance that some scholars do before. This paper analyses the firms' production and financial market in China, put forward a proposition: the extent of production market competition and debt soft budget constraint is positively relative to the ratio of capital structure, the financial behavior in China listed companies is rational response to external situation.The main work of the paper is:Firstly, this paper analyses the influence of production market competition and debt soft budget constraint on the firms' choices of capital structure. Because the intensive of competition and the debt soft constraint, China listed companies' level of debt will rise.Secondly, this paper establishes a game model of two-stage duopoly to studying the relations among product market competition, debt soft budget constraints and capital structure. We analyze and solute the game by computing sub-game Nash equilibrium of production and debt, using backward induction.Finally, this paper constructs an index to denote the extent of competitive strategy measure and uses the ratio of the year-payment and total debt to demonstrate the debt soft constrains.This paper classifies Chinese listed companies by "the guide of classifying Chinese listed companies" put in force in 2001, according with "four digit" criteria, and obtains 30 industrial samples. Then this paper demonstrates the proposition that has put forward before, using generalized least squared and unbalanced panel data between 1999 and 2006.The main conclusion of the paper is: Chinese production market changes to buyer-market, more intensive, the listed companies will increase the level of debt to scale-up; Debt soft constraint pricks up the use of debt; The increase of debt is the rational response by the listed companies to external situation. The advice of the paper is: China should regulate the conduct of enterprise's competition, perfect the system of bankruptcy, establish multi-arrangement capital market, harden debt constraint. Making the listed companies chose the optimize capital structure, buildup the ability of competition.