How To Optimize The Capital Structure Of The Chinese Listed Companies: Theoretical Analysis And Empirical Test

Capital structure is the distribution and proportions of firm's fund sources. How to optimize capital structure and improve enterprise value is a key issue in corporate finance theories. The author used a model to analyze the optimal capital structure of the Chinese listed companies and given an empirical test in this thesis.In this thesis, Capital structure and other related definition are identified, and it is analyzed the characters of the reasonable optimizing target. Maximizing the corporate value is the goal of optimizing decision on capital structure, but the goal is always deviated in the listed companies which were controlled by stockholders or insiders. A financial decision model which is aimed at special shareholder structure of the listed companies was set up to analyze the relationship between choice of financial mode and yield request of new project in different goal. The model shows that the request is same neither in condition of maximizing book value of equity nor in condition of maximizing share price. The liability financing is preferred when the yield of new project is very high. The equity financing is preferred when the yield is medium and any financing and invest will be rejected when the yield is below base line. But the range of yield request is dissimilar in different goal and different financing mode. The range of yield request with liability financing covered the range of yield request with equity financing in the condition of maximizing book value of equity. It is means that a corporate has more chances to choose equity financing with the goal of maximizing the book value of equity. But the differences will be disappeared when the market value closes or less than net asset.The author analysis the refinancing action of the listed companies used data form 1998 to 2004. It is shows that the financing order of listed companies is internal fund, loan, external equity and debenture. The author suggest that the capital structure is dominatingly determined by the difficulty of financing, uncertainty of refinancing polices and deviation of financial goal. In some senses, the financing behavior of listed companies can be partly explained by market opportunity theory.A simultaneous equation was formed to analyze the relationship between capital structure and corporate value, which eliminated the deficiencies of existing empirical test which only examined the unilateral effect. The empirical test shows that there are two-side-effects between capital structure and corporate value. The corporate value is higher, the liability financing is more preferred and the debt leverage is higher. There is a reversely U curve relationship between debt leverage and corporate value. Debt leverage and corporate value is irrelevant to ownership of top manager and the debt leverage is also irrelevant to ownership of stockholder. The test also shows the performance is significant positive to ownership of stockholder, which indicates that the incentive of ownership can help to reduce the agent cost. Similar as other research results, the debt leverage is negative to liquidity of ownership and signification positive to corporate size, profit and fixed assets.A dynamic capital structure model was set up and empirical test was done to analyze the key factors which influence on optimal capital structure and the adjusting speed of capital structure in Chinese listed companies, the Research shows that the debt leverage is significant negative to liquidity of ownership, national ownership and non-liability tax shield and significant positive to profit, actual ratio of taxation and corporate size. It is suggested that the rapider growth of firm, the more profit and the quicker adjusting speed of capital structure. It is also suggested that the corporate size is bigger, the slower adjusting speed of capital structure. In conclusion, the adjusting speed of optimizing capital structure is slow and the cost of adjusting is high in Chinese listed companies. In different period, there is a fluctuation on adjusting capital structure, which is caused by changing polices of financing and the financing environment. The average debt leverage of Chinese listed companies is less than the optimized goal, which indicates that Chinese listed companies prefer external equity to loan.