The Impact Of Asset Specificity On Capital Structure Research

In the eighties of last century, Williamson pointed out that debt financing and equity financing are not merely two different kinds of financing, more importantly, play a governance mechanism in the framework of transaction cost analysis. The theory suggests that debt financing adaptation projects with a low degree of asset specificity, equity financing adaptation projects with a high degree of asset specificity, and a large number of foreign empirical literature also shows that asset specificity is an increasingly important impact on the capital structure and they are negatively correlated. This article intends to take the actual data of Chinese enterprises to analyze the affect of asset specificity to the capital structure in the different foreign institutional circumstances.First, we summarized and combed related theories of the impact of asset specificity to the capital structure, and detail description capital structure under the perspective of transaction cost. And then, we use dynamic Vilas so and Meckler’s dynamic capital cost model as the construction of the basis of our empirical model. Finally, we draw two important assumptions: asset specificity and the capital structure was negatively correlated, capital structure has the trend of the dynamic adjustment to target capital structure. This paper selects the relevant data of the annual financial statements of listing of manufacturing enterprises from2006to2010, take liquidity of assets, the size of the business, profitability, growth as control variables. The results show that the capital structure of manufacturing enterprises and asset specificity was negatively correlated, and the correlation is more significant, instruct that the impact of asset specificity to capital structure is more significant. On the other hand, the change of the degree of asset specificity make equity financing and debt financing has a distinctly different dynamic adjustment, Thus the capital structure has the dynamic adjustment trend to target capital structure. Therefore, our business in the ordinary business activities focus on the proportion of specific asset investment, and in capital structure decision, we must pay greater attention to the impact of asset specificity factor.