Creditors Protection, Financial Development And Firms’Capital Structure

Researched on the firms’ capital structure, academics have lots offruitfulresearches from the macro and micro level. They conducted a more in-depthanalysis in terms of macro-economic factors,the firm features factors, financial factors,governance factors.In recent years, academics have begun to analyze to affect thecapital structure of listed companies and the optimal capital structure in the institutionalbackground such as the degree of market, financial development, product thedevelopment of market. Legal environment as an important factor in the capitalstructure of the system in the background influence, naturally attracted widespreadattention at home and abroad scholars. However, existing research shows that they aremainly from the legal environment or the protection of investors (mainly based onshareholders’ rights) affect the firms’ capital structure on a specific analysis. Therebyaffecting the study of law and the protection of the creditors of the firms’ capitalstructure involves less. And the current results suggest that financial development andthe firms’ capital structure was correlated creditor protection,and was correlated withfinancial development, but there is no direct evidence that the creditor protectionshowed a correlation between the firms’ capital structure.China is at a crucial stage of market reform. With the continuous improvement ofChina’s legal system and the deepening of the financial market, corporate financing andfinancing decisions are changed. These changes will have an important impact on thefirms’ capital structure.Therefore, from the institutional background，analysis theimpact of creditor protection and financial development, meanwhile, we research theimpact of financial development and the company’s capital structure, the analysis ofcreditor protection affect the firms’ capital structure and further financial development.Firstly, the article use China’s30provinces, autonomous regions and municipalitiesdirectly under the provincial panel data1995-2012to measure the various regions ofChina’s creditor protection. We found that all regions of the level of protection andenforcement of creditors continue to strengthen over time, but at the same creditorprotection and enforcement within the year there is a big difference in the level of thedifferent regions. Further, we found that the creditor protection, legislation and lawenforcement has a positive impact on the level of financial development. Second, weuse China Shanghai and Shenzhen A-share listed companies in1999-2012data to research the influence of creditor protection and financial development of the firms’capital structure. It shows that in control internal and external factors, the financialdevelopment of the company’s capital structure has positive effect. Furthermore wefound that in areas with better financial development, the level of creditor protectionand legislation on the company’s capital structure has a negative impact,and the level oflaw enforcement has a positive impact on the company’s capital structure. Finally,according to the findings of this paper, we made some simple suggestions.