The Empirical Test Of The Pecking Order Choice Of Capital Financing Way

After decades of development, Capital structure theory is already more mature, especially in the western developed countries. For China, as capital market development starts lately, in capital market enterprises'economic behavior is still not standardized. Thus, the capital market of China's needs theoretical guidance specially. Referring capital structure theory of Western developed countries is a viable path. However, such a reference need base on certain research foundation. On the basis of summarizing the development of the capital structure theory, this paper reviews relevant empirical research capital structure theory in the literature. Through empirical research design and statistical analysis, based on China's A-share market capital structure of listed companies the empirical test of the pecking order theory has been done. The conclusions obtained in this study basically support the capital structure of the Pecking Order. Based upon the literatures and theoretical analysis, the article proposes the following four hypotheses:H1: Enterprise's after-tax disposable cash flow is negative correlation with the net change of external financingH2: Selecting external financing, enterprise's external financing needs is strongly positive correlation with its liabilities-related changeH3: Selecting external financing, enterprise's external financing needs is weak positive correlation with the net equity issueH4: The proportion of state-owned shares and corporate debt ratio is positive correlation; namely, the higher proportion of state-owned shares, the more abiding by the Pecking Order theoryBased on the above hypotheses, this study designs variables and constructs test model. And using China's A-share market listed companies as studied objects, selecting the relevant data for 2002-2006, composed of panel data, using statistical analysis software Eviews to empirically test the above four hypotheses. The test results support the hypothesis of the paper--H1, H2, H3. That is to say, when the firm has sufficient funds, it will firstly chose internal financing; the liabilities-related change and the net equity issue are positive correlation with enterprise's external financing needs, but the former is stronger than the latter. The test results do not support the H4, the proportion of state-owned shares and corporate debt ratio have not positive correlation.Based on the empirical analysis, this paper proposes on the capital structure of China's market. In the end, this paper points out some limitations of the study. In this paper, the innovation is that the design of variables is based on the cash flow statement to reflect the real demand of listed companies for funds.