Capital Structure And Corporate Performance

The SEM (structure equation modeling) and PLS (partial least squares) methods have been extensively used as dominant tools of empirical analysis, and they have been named as a second generation of multivariate analysis. These two methods have a broad application in many scientific fields such as chemistry, psychology, physic and physics. Since the 1980s, they also have had an extensive application in other fields of society science including economics, management, finance and accounting. In the west, scientists have built a lot of economic models in these methods, which even includes several thousands equations. Up to now, the models still have their own great importance of description, guidance and prediction in a nation economic development.This paper try to address two important issues in SEM and PLS methods. The fist, what is the capital structure determinants of Chinese company of coming into the market? The second, how does the capital structure affect the relationship between the management compensation and the firm performance of Chinese company of coming into the market? For the first issue, as shown in the empirical research through SEM and PLS methods, the results is consistent of the traditional theory, that's to say, half of the financial indicators is significant. We can explain the capital structure determinants in the present theories. But the capital structure determinants of Chinese company have its own character. The owner structure is also the major determinant of capital structure. For the second one, as shown in the empirical results, the pay-performance sensitivity is affected by capital structure through agency cost, and the agency .cost is the incentive of the enterprises to plan the sensitivity. At the same time, three models have been built to describe and predict the sensitivity in different capital structure level.In this paper, the methodologies of empirical analysis and science modeling have been adopted to research the capital structure determinants and pay-performance sensitivity of Chinese company coming into the market. Some models have been built and fit well enough through data restructure test; they are of great reference and application value for the economic practice.