Corporate Capital Structure: Theory And Empirical Research

One of the oldest and most important issue in corporate financing is on what a corporation decided how to acquire the capital required in its investment and how to operate it, which, called the theory of corporation capital structure, is a substantial part of the micro-finance theory and firm theory .The main aim of studying the capital structure is not only to offer a theoretical explanation and prediction on the benefit relationship, the interaction mechanism and the cost and revenue of those who has a contract relationship with each other as well as the relationship between the capital structure and the value of the corporation, but to offer a theoretical direction for capital operation .optimising the capital structure .constructing the optimal property right structure and improving the governance structure in a firm's practice.In this chapter, the author gave out an inclusive comments on the development of the capital structure theory and constructed a capital structure theory of our transforming economics after exploding the definition of the capital structure and then discussed the role of capital structure in sifting, stimulating and monitoring the management with connecting corporate governance with capital structure; considered the influence on the evolution of state owned corporations' capital structure and corporate governance from the evolution of the corporate finance system, and performed an empirical analysis to the connection between the determinants of our corporation, the industrial difference, regional difference, capital structure and the corporate efficiency as well as the finance preference by an econometrics approach, and pointed out that the goal of the optimising state owned corporations' capital structure is to maximize the net asset revenue rate and that the means of optimising the state owned corporations" capital structure following the thought of a double- optimal of capital structure and governance structure. 1.The author decomposes the capital structure into micro capital structure and macro capital structure .The former, in a narrower sense, is a proportion of the items in the right side of a firm's balance sheet and the right and duty structure reflected by it; and the corporate capital structure, in a extensive sense, encompasses the proportion of various capitals, such as corporate finance capital, human capital in a firm besides above one. Instead, the macro capital structure refers to a proportionate relationship of the various capitals in a country and the economic connection it reflects. Marx's theory of capital structure is a mixed one, while, traditionally, the western capital structure theory is a micro one, and thus it is the topic of my story as well. 2.The author interprets capital structure in the way of cash flow allocation andcontrol right allocation, arguing that the choice for corporate capital structure is closer to corporate governance rather than a problem of distribution between the share holders and bond holders, and that in fact, the corporation capital structure decision, to some extent, is a corporate governance decision as well as the allocation of the firm's property right among the different agent. Additionally, the decision of a firm's optimal capital structure goes with its optimal property right structure. 3.Corporation capital structure affects the stimulation of managers, share holders, and debtors as well as their behaviour so as for the bankrupt cost in that the change of a corporation's financing mode means the change of stimulation and their behaviour. The latter will change the profit and the value of a corporation. The stimulation of beneficial agent correlated, I believe, depend on the debt/revenue ratio as well as the equity held by the management, the degree of conglomeration of the share held by the outside big investor, the composition and the power of directors board, the loan agreement and the compulsory clauses in debt contracts, and the available resources for a corporation while in finance awkward. 4.The financing mode of s...