An Empirical Study Of Corporate Governance And Capital Structure’s Influence On The Value Creation Ability Of Listed Companies

Value creation ability is the key factor of company’s sustainable development andkeeping sustainable competitive advantage. To strengthen corporate governance andoptimize the capital structure are the foundation and guarantee to improve companyvalue creation ability and maximize shareholder value. However, because our countrycapital market itself is flawed, corporate governance is imperfect, stock liquidity is low,and the relevant laws and regulations to protect the minority shareholders is not sound,etc, value creation ability of our country listed company is generally low. HongBoWeng (2006) found that EVA in about65%of the listed companies in China in recentyears is negative. SuMei Ruan&Shanlin Yang(2013) found that negative EVA oflisted companies in2000accounted for86.89%, Negative EVA of listed companies in2010accounted for64.2%, which show that our country listed company value creationability is generally low in these11years, but a growing number of companies valuecreation ability is increasing. Corporate governance and capital structure governance isthe core of enterprise management, good corporate governance mechanism and thereasonable capital structure is the key processes to attract investors, improve thecompany’s operating status and improve the ability of value creation. There are a lot ofinfluence factors and means in improving company value creation ability. This articlefocuses on the independent and comprehensive effect of corporate governance andcapital structure factors’ impact on the listed company value creation ability, which hasa strong theoretical significance and important application value to further improve thecorporate governance structure in our country, optimize capital structure and increasethe company value creation abilityFirst, this paper describes related theory of corporate governance, capital structureand corporate value. Secondly, the paper analyzes the mechanism of action betweenownership structure, capital structure and corporate value creation. This paper looks forthe key factors affecting the value creation ability of listed companies and therelationship between these factors by using the statistical analysis methods, anddiscusses the equity structure and capital structure factors’ independent impact andcross matching effect on the value creation ability of listed company by using multiplelinear regression models with cross-product terms, binary choice Logit models, andpartially linear unbalanced panel data models. Third, by building structural equation model, this paper establish a comprehensive analytical framework to analyses the valuecreation ability of listed companies, which includes the factors of board governance,ownership structure, capital structure and corporate finance. Finally, this papersummarizes the research and outlook.The main research contents and innovative work of this paper are as follows:First, this paper put forward the heterogeneity of the value creation ability oflisted companies at the first time; do the systematic analysis and quantitativedescription to the forms, internal mechanism, and influence of the heterogeneity of thevalue creation ability. This paper makes a reasonable explanation to the heterogeneityof the value creation ability of listed companies from the aspects of ownership propertydifferences, equity balance degree differences and company size differences etc. Thispaper establishes the heterogeneity analysis method of listed company value creationability based on Quantile regression model. This method is able to capture the detailedfactors at different quantiles which have influence on value creation ability of listedcompanies, thus it could overcome the limitations of no difference by description meanreversion, and it also could reveal the heterogeneous behavior of listed companies’value creation ability more deeply. The empirical results show that these three factorshave significant impact on the value creation ability of listed companies, but it showheterogeneity. The value creation ability of listed companies on the tail and under thetail has a larger regression coefficient, so we need to pay special attention to the higherand lower level companies of value creation ability. We can take "catch two head,promote middle" corporate governance strategy; The possibility of various factors’influence on the positive value creation ability of listed companies express "bent,terraced", which means that only when the value of various factors accumulated to acertain degree, the possibility may change. And the change is most sensitive to thecompany scale. So to achieve the ability to enhance value creation, the company needsto be accumulated and preparation of various factors. This empirical result hasremarkable economic meaning and is beneficial to use targeted measures to improvethe value creation ability of listed companies.Second, this paper creates the optimal equity balance degree measurement torealize the value creation ability of listed companies, which solve the optimal size ofthe equity restriction choice, and discusses different influence model of equity balancedegree’s impact on the value creation ability by using the unbalanced panel data basedon the partial linear model: linear and nonlinear, and finally gives a preferred embodiment. On the basis of a nonlinear relationship, this paper further gives theoptimal balance of the scale of changes in equity. The empirical results show that thevalue creation ability of listed companies decreased with equity restriction increased,showing the "inverted U" variation. The optimal equity restriction scale is3.242. Andfrom a practical perspective, China’s listed companies equity restriction averages from1.334in year2000to1.609in year2010. Contrast to the optimal equity balance degreescale, equity balance degree in China is low. This innovative result provides empiricalevidence to perfect the governance structure and improve corporate value creationability of Chinese listed companies, which has important practical significance.Third, this paper establish a comprehensive analytical framework of theinfluential factors of the value creation ability of listed companies, which overcome thepast framework that only have one-sided discussion of an individual contribution to thesector factors, and not a comprehensive analysis of all factors contribute to the plightof the plate. Board governance, ownership structure, capital structure, corporatefinance, and corporate value are not directly observed, so we build structural equationmodel, measure the potential variables by Factor Analysis, discuss the potentialdependencies between variables by Path Analysis, and establish a comprehensiveanalytical framework of the value creation ability of listed companies. So we canassess the directly or indirectly affect of the board governance, ownership structure,capital structure, corporate finance and other factors on the value creation as a whole.This comprehensive analytical framework can make full use of various informationand give the listed company value creation ability overall analysis, which can providethe theory and method for the follow-up studies. The empirical research shows that: thedirect influence of board of director’s governance and ownership structure is notsignificant; the both only have indirect effects; the capital structure of listed companyboth exist directly influence and indirect effects; the company’s financial existencedirectly affected. We can see that board of directors governance, ownership structure,capital structure and corporate finance have directly or indirectly influence to the listedcompany value creation ability, according to the overall effect size, prioritize asfollows: the capital structure, ownership structure, corporate financial governance, theboard of directors.Fourth, this paper carefully distinguishes independent effect and cross effect ofdifferent factors affecting the listed company value creation ability by usingeconometric methods. This paper looks for the key factors affecting the company’s ability creating and the relationship between these factors by using the statisticalanalysis methods. Further this paper creates the comprehensive judgment model thatcan predict and evaluate the listed company value creation ability, which overcome theone-sidedness and limitations of related study unilateral or with a single index. Thispaper discusses the equity structure and capital structure factors’ independent impactand cross matching effect on the value creation ability of listed company by usingmultiple linear regression models with cross-product terms, binary choice Logitmodels, and partially linear unbalanced panel data models. So we can distinguishdifferential model of value creation caused by corporate governance and capitalstructure in in different levels of listed companies. The cross matching effect changedthe notion that take the influence factors as the assumption of independence, andexpand the research train of thought. So we can consider the cooperate effect betweeninfluence factors. For the positive effect, we can provide decision-making basis for thecombination of the corporate governance policy design and has important applicationvalue.