Study On The Correlation Between The Capital Structure And Performance Of China's Manufacturing Listed Companies

The correlation between capital structure and business performance of listed companies has been a hot topic for a long time. Capital structure is the result of different financing channels, and it describes the makeup of asset. While business performance reflects the effect of company's capital, just the profitability of different assets. According to the tax-saving effect of liability, performance will increase as liability rises. Based on Pecking Order Theory, company would focus on internal earnings when it chooses to finance. And the company with good performance needs less external liability. In the light of different theories, correlation between capital structure and business performance of listed companies has different conclusion. Many academicians have studied this field. There are two perspectives, one is that the correlation is positive, but the other is negative. Recently the negative conclusion has the advantage over the positive one. However how they correlate is inclusive. Because different industries may have different capital structure and business performance, and manufacturing-listed company is significant in our nation's economy, this thesis chooses manufacturing-listed companies as study object.This thesis first summarizes capital structure, business performance and the correlation between them. Second, after explaining the reason of choosing manufacturing-listed companies as study object, thesis describes the features of manufacturing-listed companies. Third, totally 45 manufacturing-listed companies are chosen as samples. This part does principal component analysis to those samples'capital structure and business performance and finish OLS on the synthetic index. Statistical analysis result shows that 68.89% samples are negative correlated. Therefore, we get the conclusion that most of manufacturing-listed companies'capital structure and business performance are correlated negatively. At last, there are the reasons of the negative correlation and summary of the entire paper.