Determinants Of Capital Structure Of Chinese-listed Companies

Capital structure theory has been comprehensively discussed and studied once it is raised by Modigliani and Miller in 1958. Foreign scholars has spent a lot of time to study the determinants of capital structure and got useful results. However, foreign scholars study foreign companies and little has been done to study companies in China, a new developing market. This article mainly studies determinants of capital structure for Chinese listed companies.This article firstly reviewed the developing of capital structure theory. Basing on capital structure theory, we summarized determinants of capital structure. In order to study the determinants of Chinese listed companies' capital structure, it is necessary to understand the current situation of capital structure for Chinese listed companies. Then, we found several problems of capital structure. On the basis of them, we extracted determinants of capital structure for Chinese listed companies. At last, this article use econometrics method to examine the effect of capital structure on firms' financing decision.The research reveals that industry is one of the most important factors affecting capital structure of Chinese listed companies. Capital structure differs greatly among industries. According to this result, we choose two industries for further analysis, one is Food & Drink Industry, the other is Information Technology Industry. The results show that the leverage of two industries positively relates to the corporation scale, cash situation, and negatively relates to profit earning capacity, and has no relation to the proportion of collateral assets. In addition, the growth factors react to capital structure obviously in Food & Drink Industry, the tangibility of assets and product specialty react to capital structure obviously in Information Technology Industry.At the last part, the author gives some suggestions on optimizing the capital structure of listed companies, which concerns two parts. One is for the single company concentrating on how to choose the proper capital structure and financing instruments considering the characters of its own. The other is for our government, emphasizing on how to establish a good institution environment for corporation's financing.