Study On The Effect Of Debt Financing On Firm Value

The company’s financing decision is always one of the core issues in the financialarea. Recently, Chinese and foreign scholars have got fruitful results and made greatcontributions to the theoretical research in this field. But China’s listed companiesgenerally have a tendency to equity financing, which cause domestic research on debt isnot specific and thorough enough. In theory, scholars got inconsistent conclusions on theimpact that debt financing bring to firm value. But most of these studies ignore companies’profitability. In view of this, the thesis discusses the influence of debt have on firm valueunder different background of profitability, in order to enrich domestic study on debt andto help to promote the allocation of debt structure.The thesis chooses A-share listed companies on the Main Board as a sample,combines theoretical analysis with empirical analysis, and uses factor analysis and multiplelinear regression analysis to study. Firstly, the thesis looks back the existing results athome and abroad from three aspects: the debt financing, the firm value and the relationshipbetween them. Secondly, the thesis analyzes the different pattern that the debt financingscale, the debt maturity structure and the debt financing type working on firm value basedon the companies’ profitability. Finally, the assumptions about the debt financing and firmvalue would be confirmed through empirical research. In the empirical part, the thesisevaluates companies’ profitability through factor analysis, and divides the sample into twogroups by cluster analysis. Then the impact that debt financing bring to firm value wouldbe verified in two samples by multiple regression analysis.The results of the research show that: about70%of the listed companies expand thescale of debt each year, and they tend to choose short-term debt, whose average ratio isabout80%. More than90%of the companies will choose commercial credit and bank loanto finance, while nearly30%of the companies choose to bond. Empirical studies show thatit would be helpful for high-profitable companies to expand debt financing scale, to chooseshort-term debt and to choose commercial credit debt, while it would be benefit for low-profitable companies if they reduce the debt financing scale, choose short-term debt and bank loan if necessary.