The Research Of Correlation Between Asset’s Liquity And Capital Structure

This paper focuses on how liquidity affect capital structure’s selection which lead to the existence of academic debate, using China’s capital market2005-2006listed companies’data in the inspection. The empirical results show that, for the listed companies in China, liquidity and capital leverage have significantly positive correlation between relationship, it shows that, generally speaking, with the improvement of liquidity, which could reduce the enterprise and the creditors’ expected cost and improve the enterprise bankruptcy of short-term debt paying ability, improve the ability of enterprises borrowing cash from creditors, so as to enhance the enterprise asset ratio. Further research considered that the different bankruptcy marginal and the disciplinary’power of the management, the results of the study show that, higher bankruptcy for asset liquidity and marginal asset-liability’s positive relationship have a significantly negative effect, which show that the management have considered self-behalves, when bankruptcy cost is higher, they reduce the asset-liability ratio; In considering the management power, the results of the study have show that, when management power is bigger, the asset-liability ratio for liquidity and positive relationship between and a significant negative influence, the results show that the increase of the liquidity will result in the transfer of company assets and deprived of shareholder value cost reduction, which will lead to the creditors of the strong reaction, and make them reduce the size of the debt.