Analysis On The Dynamic Adjustment Path Of Capital Structure In Chinese Listed Companies

The adjustment of capital structure is one of the core issues in modern enterprise management.It is generally believed that the adjustment of capital structure requires considering major factors affecting the adjustment decision,which can be internal and external.As for the external environment,the national economy of China has been gradually developing into "New Normal" from its rapid growth in the past because of the shrinking international markets since the outbreak of the subprime mortgage crisis on Wall Street in 2008,as well as the problems of economic development at different levels in China.Then the new government proposed a strategic plan of "supply-side structural reform" to support economic development.In December 2015,the Economic Conference of CPC Central Committee first proposed the five-point goal of "cutting overcapacity,destocking and deleveraging,reducing corporate costs and shoring up weak spots",so as to cut excessive production capacity,eliminate real estate overstock,reduce the risks in corporate leverage,decrease costs for enterprises,and improve infrastructure.But these have also had an impact on a large number of traditional industries of China,and in particular,the cement industry in the manufacturing sector.The cement industry,in recent years,was confronted with operational risks such as overcapacity,higher production costs and lower profits,as a result of rising prices of production factors,financing difficulties and intensified market competition,as well as the shrinking of downstream industries such as real estate and infrastructure construction.Some cement companies were also caught up in a financial crisis.In response,the government proposed in 2016 that the cement industry should be structurally adjusted by "compressing excess capacity"and "promoting peak-shifting production".Under the guidelines of "promoting joint reorganization",meanwhile,many listed cement companies acquired each other and restructured themselves,which indicated that a restructuring boom happened in China’s cement industry to enable further structural reform on the supply side.In this context,in order to adjust the industrial structure and cope with the product market competition under the "new normal",the cement industry of China will inevitably optimize its capital structure,enhance its development potential and resist external risks.The academic circles have made great contributions to both the theory and practice of capital structure adjustment,but whether the cement industry,limited by its characteristics,can base the d of capital structure adjustment on the research results of predecessors is still a question.Accordingly,in the framework of the western theory of capital structure and limited to the period before and after the "new normal" of China’s macro-economy,the characteristics,determinants,dynamic adjustment and adjustment path choice of the capital structure of sample enterprises are analyzed in this paper using the dynamic adjustment model of capital structure,existing research results,and panel data of the financial statements of listed cement companies in China from 2000 to 2016,for the purpose of enhancing the value of enterprises of China’s listed cement companies.With empirical results,this paper also analyzes the capital structure optimization of sample enterprises from the perspective of the dynamic adjustment of capital structure,summarizes the determinants of capital structure adjustment and the mechanism for adjustment path choice,and thus provides theoretical basis and practical guidance for the decision making of cement companies in capital structure adjustment.The contents of this paper are as follows:Introduction:research background and significance of this paper,review of and comments on existing literature,research ideas and methods,contents arrangement and possible innovations and shortcomings.Chapter I:theoretical basis and optimization mechanism of capital structure.It first defines the connotation of capital structure and its related concepts,and sorts out the views of different schools on the theoretical basis of capital structure and then,with the maximization of enterprise value as the goal,it discusses the theoretical mechanism of optimizing the capital structure of enterprises.Chapter II:analysis on the characteristics and trends of the capital structure of China’s listed cement companies.It first analyzes the general situation of the cement industry.Then based on the theory of optimal order,it analyzes the financing features of the corporate capital structure using statistical description method and thus summarizes the laws of financing structure changes and financing preferences of sample enterprises.At the end,according to the existing research results,it analyzes the trend of capital structure changes of listed cement companies from different perspectives and extracts the potential influencing factors that may cause the capital structure of listed cement companies to change,providing the basis for the analysis on the factors influencing capital structure in Chapter Ⅲ.Chapter III:analysis on the determinants of the capital structure of China’s listed cement companies.It first analyzes,from the micro and macro point of view,the theoretical basis of main factors affecting capital structure,and the transfer mechanism and direction of the influence of those factors on the capital structure;it then uses the financial data of sample enterprise from 2000 to 2016 to study the determinants of the capital structure of sample enterprises based no fixed effects model.Chapter IV analyzes the dynamic adjustment of the capital structure of China’s listed cement companies.Based on sorting the theories of dynamic adjustment of capital structure,it extracts the viewpoints of research results and constructs the dynamic adjustment model of capital structure of listed cement companies.Chapter V studies the path choice of China’s listed cement companies in capital structure adjustment.It first makes theoretical analysis on the connotation and factors of adjustment path of capital structure for enterprises,and then analyzes main factors influencing the path choice of listed cement companies in capital structure adjustment using the sample data of these companies.At the end it analyzes the effects of the path choice in corporate capital structure on the maximization of corporate value and the magnitude of capital structure adjustment and develops the best choice of listed cement companies in capital structure adjustment.Research conclusions and policy recommendations:summarization of the findings of this paper,and on this basis,some suggestions on how to adjust the capital structure of China’s listed cement companies.Based on theoretical analysis and empirical test,this paper obtains the following four major findings as follows:1.The characteristics of capital structure of listed cement companies are seemingly conformal to the pecking order theory,and the time-varying trend of capital structure is different from each other when considered from different point of view.2.Based on the comparative analysis before and after the "New Normal",the determinants of the capital structure of listed cement companies in China are differently robust.From the time comparison analysis,before 2008,the return rate of listed cement companies and the proportion of state-owned shares had the most significant impact on the capital structure.Factors such as profitability,liquidity,and corporate governance were on the contrary.After 2008,China’s economy gradually entered the "new normal",and stock returns,corporate size,tangible assets,asset liquidity,corporate profitability,and growth have significant effects on corporate capital structure.3.The target capital structure of the capital structure of listed cement companies is affected by characteristics such as company size and growth capability.In the analysis of the quasi-dynamic and dynamic adjustment models,the decisive factors affecting the speed of adjustment of the capital structure of sample companies are different.A further contrast analysis of the "new normal" shows that there are differences in the robustness of the factors influencing adjustment speed.4.The determinants of and the effects on the dynamic adjustment of the capital structure of listed cement companies.Firstly,in respect of the determinants of the choice of capital structure adjustment path,market returns,the proportion of state-owned shares,corporate growth,profitability,and non-debt tax shields and other corporate characteristics are influencing in different ways the five adjustment paths,commercial credit financing,equity financing,long-term debt financing,and short-term debt financing and internal retained income financing.Secondly,judging from overall effects,among the five capital structure adjustment paths for listed cement companies,long-term debt financing,equity financing,and incoming retention financing can improve the market value of the company,and the remaining two are on the contrary.Also among the five paths,equity financing will not only improve the discounted value of a company’s future earnings and the risk resistance,but will also reduce the magnitude of its capital structure adjustment.Therefore,equity financing is the best choice for listed cement companies.