A Research Of Financing Structure Based On The View Of Asset Specificity

The financing policy has a pivotal impact on corporation value, and research of the financing structure has thus been the focus in the academia. The former researches are mainly based on the view of asset homology. However, along with the increasing dependence on special asset investment to win competitive advantage, some certain degree of asset specificity has been the prevalent characteristic of corporation at present. Thus, it bears a higher theoretical and practical meaning to a research of the financing structure from the view of asset specificity. As the contract relationship among the manager, shareholder and the creditor is the basic factor of a corporation and the theoretical basis of financing theory, this article carries on a systematic research on the financing structure choice from the view of asset specificity based on the condition of complete contract and incomplete contract respectively, in addition, using the concept of environmental dynamism, the article farther analyzes the impact from the industrial competitive environment. The results suggest that, as in the condition of complete contract, asset specificity will influence the relative intensity of the agency cost of equity and debt financing, and farther influence the optimal financing structure. While in the condition of incomplete contract, through an effect on the optimal quantity of debt payment, the change of asset specificity will also induce the change of the financing structure. However, in spite of the difference of analysis point of view and the function mechanism, a coincident research result is achieved in the two conditions, that is, when the degree of asset specificity is increased, the shares of equity financing would increase and the debt financing reduce. On account of the competition environment, along with the increase of asset specificity, while the environmental dynamism is enhanced, the shares of equity financing would increase and the debt financing reduce and when the environmental dynamism is weakened, debt financing would increase and equity financing reduce. In order to testify the applicability of the theory on the Chinese corporation suffering transition, the article chooses 96 companies from three typical industries—--the electronics, medical & biologic product and information technology where the investment on the asset specificity is relatively popular, from Shenzhen and Shanghai Stock Exchange during 2000-2004 as the samples for an empirical test. The result is that, in Chinese listed companies, the relationship between asset specificity and financing structure is not distinct. The results show the unawareness of asset specificity of Chinese manager in their choice of financing structure, however, the deeper reason that makes sense is the fuzzy contract relationship among themanager, shareholder and the creditor in the Chinese listed companies. It is the basic souece that leads to the departure between the corporation financing structure and the theoretical optimal financing structure. Finally, the article suggests the standardization of the contract relationship would the precondition for the optimization of Chinese companies' financing strategy and proposes three advices such as the reformation of the corporation governance structure for reference.