The Relevance Of Capital Structure And Enterprise’ Value Of Medicine Manufacture Industry Listed Companies

The enterprises’ capital structure is always a popular research field of Financial Management and CostManagement. Different capital-asset ratio takes different risk and cost. The higher of equity capital ratio,the smaller of financial risk, and the more of financing cost, and debt capital applies the opposite.Reasonable capital structure can help the firm to reduce financing cost, take full advantage of risk and thefunction of financing leverage to promote enterprise’s value. There is a phenomenon that Chinese listedcompanies prefer equity fund rather than debt fund. In capital structure, the ratio of debt is too low. In therunning of the business, the concept of capital structure management is not deep enough, and is not up tothe height of firm strategy. The firm can’t well plan capital structure and take full advantage of financingleverage, and this could have had some impact on the firm’s business performance and enterprise value.This paper researches the relevance of capital structure and enterprise’ value. Firstly, I summary andanalyze the research of this area at home and abroad. Foreign literature mostly proved that capital structureand enterprise’ value have a positive correlation. And domestic research has different conclusions. Theyfind different industry has different correlation. It is visible that in our country, industry has a big influenceon capital structure. So this paper mainly studies the relevance of capital structure and enterprise value ofChinese listed companies of medicine manufacturing industry. And try to provide some constructivesuggestions for financing decision and the optimization of capital structure.Firstly, this paper simply introduces some traditional and modern theories of the relevance of capitalstructure and enterprise’ value, and then analyze the factors that can influence a firm’s capital structure. Iuse specific data and analyze the current situation of capital structure of Chinese listed companies of medicine manufacturing industry and find that it has the following phenomenon: the asset-liability ratio islow, the short-term debt ratio is high and the scale of bond financing is small. Then, I use Econometricsmodel to analyze the relevance of capital structure and enterprise’ value of listed companies of medicinemanufacturing industry. I use companies that issue A stock as research object and select65companies,three years data of2009-2011. I use cross section data analysis method to research this matter. Theconclusions of this paper are: and there is no notable relevance of capital structure and enterprise’ value. Atlast, I put forward some possible reasons of this result and some suggestions to optimize capital structure.