Study On The Relationship Between Capital Structure And Beta In China's Listed Company

During the development of the capital market theory research, it has been the core question in finance research of how to measure investment risk correctly. Through the risk research, on the one hand, we can understand what risk should be considered during the company's financial decision-making or investment decision process; On the other hand through the study of companies or inquire of the investment project cash flow for valuation, how to set reasonable discount rate, namely the expected rate of return of the company.Since the1950s, the quantitative analysis of the property risk management developed gradually. Williams Sharpe, John Lintner and Jan Mossin established the famous the Capital Asset Pricing Model (Capital Asset Pricing Model, hereinafter referred to as the CAPM Model). This Model divided risk into two categories: systemic risk and non-systematic risk, and the systemic risk chose beta coefficient as a systemic risk measure. The higher beta coefficient means the bigger systemic risk of the assets. Beta coefficient has been widely used in corporate finance, investment and portfolio management, and events study of the performance evaluation of investment funds. According to their risk of preference, investors can select the specific assets project portfolio by the observation and comparison of assets'beta.The calculation of beta coefficient is difficult. At present, the method widely used of estimating beta coefficient is based on historical data, but it needs large quantities of data and has certain deviation for the future estimates. In fact, many investors do not have to know the specific beta value, but just need the influence factors of the beta value. So many scholars have invested in studies of the impact of systemic risk factors, especially the impact study of the company's basic characteristics to its beta.The systemic risk is composed of two parts, namely business risk and financial risk. Business risk depends on the nature of the company's business activities, not affected by changes in capital structure. Established company operating risks and the cost of debt capital (interest rates) unchanged; the financial risk depends entirely on the capital structure policy.Corporate capital structure theory is also an important part of modern corporate finance theory, and the main research is how to arrange their financing structure in the business process. There are mainly two criteria of measuring corporate capital structure:First, whether the enterprise value is biggest; second, whether comprehensive cost of capital is lowest and the risk is moderate. The capital structure is one of the important factors for systemic risk.For listed companies in China, what is the relation between capital structure and the Beta? In terms of different industries, if changes in the capital structure of listed companies are effectively reflected on the changes of the beta coefficient? How does the capital structure influence the company's beta coefficient? That is the focus of this study.The sample of this article is issued from persistently operating companies for 2009and2010in Shanghai and Shenzhen A-share listed,12industries (except for the financial industry). We selected the listed company's annual beta coefficient as the dependent variable and the capital structure as the independent variable. At the same time, in order to exclude the interference of other factors, based on the classification of samples'industry, we introduced the representative control variables, including asset size (N), total assets growth rate (g), the return of equity (ROE), earnings per share (EPS), net profit growth (NPG), the current ratio (CR), to make our results more accurate of the correlation between capital structure and Beta.On the basis of the sample correlation and regression analysis, the paper concluded that:On the whole, listed companies'Beta and capital structure showed poor correlation, only in the manufacturing, electricity, gas and water production and supply industry, real estate and transportation, warehousing industry, the capital structure and the beta coefficient was significantly associated, and the capital structure of the beta coefficient of electricity, gas and water production and supply showed a negative correlation. There were some industries showing that the direction of correlation between capital structure and Beta is unstable, which is inconsistent with traditional finance theory. It is means that China's listed companies'Beta failed to reflect the company's changes in fundamental information, and the market efficiency is poor. Capital structure of inter-industry differences, but the overall level of equity financing is high.According to the conclusions, this paper presents relevant policy recommendations:1, Improve the quality of listed companies'information disclosure;2, Impose the small investors'risk education;3, Develop and improve the institutional investors;4, Vigorously develop the bond market, optimize the financing structure;5, Improve the market environment, optimize the capital structure of listed companies, and reverse equity financing preference.