Economic Growth, Entrepreneur Confidence, Corporate Characteristics And Capital Structure Decision-making

Enterprises of different funding sources have a different capital structure; capital structure reflects the contractual arrangements between the owners of capital structure and the company's other stakeholders. The capital structure decision-making will determine directly the choice of enterprises of different sources of funds as well as the proportion of equity and debt, through playing the unique role and the rational allocation to coordinate interests and behavior among all relevant stakeholders. Many factors affect capital structure decisions, but also the core issue of corporate finance decision-making, about their research has important significance.Since the birth of the well-known MM theory, foreign study of decision problem of capital structure enter the new stage and take shape two climaxes to get a several of research result in the 70s to 90s in 20 century, the mainstream theories about capital structure decision was born. They are capital structure theorists and capital structure determinates. Since our country carry out the reform and open, the reform of modern enterprise system and financial system are misplace seriously. It made our country's financing system have several of problems in the condition of modern enterprise system and market system is carried out. The study of capital structure decision is born along with time in our country. Look at the research in the world, almost scholars'study of capital structure decision are mainly embodied the value-based management system, build on the rational behavior, capital asset pricing model and efficient market. From the micro-level of factors of corporate character, corporate governance, research for the factors of influence the capital structure decision, but lots of abnormal occurrences like equity premium puzzle, small corporation effect start come up with query for efficiently operating market. It shows the study of base on the category of traditional financial theory can't explain the capital market in nowadays.Just because this reason, this paper tries to blend behavioral finance and cognitive psychology, bond our country's macro marketing environment; consider decision maker's cognitive bias. From the economic gain, business confidence and enterprise characters to research the capital structure decision's influence.There are six chapters. Each chapter's main content as follows:Chapterâ… :introductory theory. This chapter mainly explains the topic background and meaning, research thinking and ways, article innovation and shortages. Provide the necessary base of research. This text's research thinking is capital structure decision is influenced by macroeconomic condition, macroeconomic policy and economic cycle's effect. Bond our country's enterprise finance current situation. Because the cognitive bias of decision maker in the decision-making process of capital structure decision to lead to decision maker's psychological variable. Analysis macro-economic factors, entrepreneur confidence index's effect for capital structure decision.Chapterâ…¡:related literature review. This chapter reviews and summarizes the related literature from the traditional capital structure decision-making theory, capital structure decision-making theory based on behavioral finance theory and capital structure decision-making theory based on macro-economic factors. Get the following revelation:decision-maker cognitive bias, non-rational behavior affects the capital structure decision-making; decision-maker's personal characteristics factors (over-optimistic) will be a new area of theoretical research of the determinants of capital structure. In addition, in view of the unique nature of China's capital market, macro-economic factors are also the reason that affects the capital structure decision-making. Therefore, this paper selects economic growth, entrepreneur confidence as a research perspective.Chapterâ…¢:economic growth on the impact of capital structure decision-making. This chapter explains macroeconomic environment's effect for enterprises'capital structure decision from macro-economic condition, macroeconomic policy, and economic cycle; chooses the real economic growth rate as the measurement indicator of macroeconomic environment.Chapterâ…£:entrepreneur confidence on the impact of capital structure decision-making. This chapter first analyzes the financing status quo of enterprises in our country, bring forward the existence of entrepreneur cognitive bias, and separately illustrate that entrepreneur as a manager behavior triggered by the cognitive bias on the impact of capital structure decision-making. And then it present entrepreneur confidence, select the entrepreneur confidence index as a metric.Chapterâ…¤:research design and empirical analysis. This chapter continues the discussion of the third and the forth chapter. It chooses economic growth, entrepreneur confidence and business characteristics to build a theoretical model and balanced panel data model about the capital structure, selecting the 1999 and 2008, crossing-period of 10 years,360 listed companies as a study object. The study found:company size, economic growth and risk on the capital structure have no significant impact; corporate profitability is negatively correlated with the capital structure; asset value of the collateral is positively correlated with the capital structure; macro-economic conditions on the capital structure has no significant impact; entrepreneur confidence index is positively correlated with the capital structure. It can clearly be seen that decision-maker psychological expectation indeed has an influence on the capital structure decision-making.Chapter VI:the conclusion. This chapter summarizes the previous chapters from the normative to the empirical analysis, points out that the study ignored the question with a view to continuous improvement on the further study. For listed companies, it should be combined with some factors like as corporate profitability, asset-backed value to make some reasonable capital structure optimization that is not only to meet corporate profit goals, but also to avoid the financial risk. When selecting the best capital structure, it not only considers the cost of capital, financial risk, but also comprehensive consideration of other influencing factors, such as the decision-maker's attitude. The results show that macro-economic condition, the company size and the company growth on the capital structure have no significant impact. The reason is that we do not distinguish between companies in which industries, business growth cycle and enterprises themselves whether there are different constraints. This is a further study to consider the issue.The main contribution of this paper:this paper draws on behavioral finance and cognitive psychology theories and methods, considering the decision-maker's cognitive bias, introducing the psychological variable. Meanwhile, it introduces the macro-economic factors, examining the impact of the capital structure decision-making. In the writing process, the paper will choose a sample of 360 listed companies from the Shanghai and Shenzhen in China in 1999-2008; build a theoretical model and panel data model of the real economic growth, the entrepreneur psychological variable (entrepreneur confidence index) and corporate characteristics which affect the capital structure; carry out the empirical study. The study found:company size, economic growth and risk on the capital structure have no significant impact; corporate profitability is negatively correlated with the capital structure; asset value of the collateral is positively correlated with the capital structure; macro-economic conditions on the capital structure has no significant impact; entrepreneur confidence index is positively correlated with the capital structure. It can clearly be seen that decision-maker psychological expectation indeed has an influence on the capital structure decision-making. This gives us a deeper understanding of the motivations of decision-maker to make financial decisions and provides a new perspective to improve the act of decision-maker, market regulator and investor.Disadvantages:the company's capital structure decisions are made in a particular economic environment, financial markets, corporate governance mechanisms, and cultural background. In addition to the impact of the external environment, internal motivation and decision-maker's cognitive bias, there are so many other factors. This study will focus on macro-economic environment; the decision-makers may be limited rationality on the impact of excessive self-confidence. Other factors, such as corporate governance mechanisms, cultural background are not discussed. It is inevitable sweeping may be affected comprehensive conclusions. At the same time in the capital structure decision-making analysis using National Bureau of Statistics published by entrepreneur confidence index as a substitute for psychological variables in the empirical research will not distinguish between different regions, different industries, and different life cycles. If the entrepreneur confidence index represents the incomplete, regional differences, industry differences, or life-cycle differences, it may make the conclusions inaccurate.