Research On Impact Of The Capital Structure On Company Growth

The growth of enterprises on behalf of the future value of enterprises, not only has important significance for the enterprise managers, investors and other stakeholders, but also for the national economy. How to measure the quality of an enterprise?Not only the current situation, but the potential and investment opportunity for future development.However, the development of enterprises cannot do without financial support, so the enterprise financing strategies has vital significance. How to balance the proportion of equity financing and debt financing, select a suitable financing policy that will promote the enterprise development and improve the enterprise value. So,I will discuss the growth of enterprises from the financial point of view,to research the influence of capital structure on the growth of companies.Although there are an amout of papers about capital structure and the growth of companies at home and abroad,which devoted to the study of the capital structure influence the growth is little. so far, research on capital structure and growth of companies of domestic and foreign scholars is inconclusive. Most of foreign scholars believe negative correlation,for example Myers(1977),Bradley (1984),Chung(1993)etc,and some other foreign scholars have obtained positive or no significant correlation. Domestic research on this subject started relatively late, but also has obtained abundant achievements.Some domestic scholars’conclusion is negative correlation, for example Wu Shinong, Li Changqing and Yu Wei (1999), Shen Genxiang, Zhu Pingfang (1999), Chen Chao and Rao Yulei (2003) etc. Some obtain positive correlation,for example Yu Haiqin and Chen Huijuan (1999), Lv Changjiang, Han Huibo (2001), Lu Zhengfei (2006) etc.And others believe that there is no significant correlation.Thus,public opinions are divergent. Research for the capital structure and growth of companies is inconclusive.The definition of capital structure has broad and narrow sense,I select broad sense definition. The definition of enterprise growth has not yet the same conclusion at home and abroad. The definition of growth in the general sense believe that growth is the comprehensive features of the enterprise, including "quality" and "quantity" two aspects.The so-called "quality" refers to the enterprise reform and innovation, including technological innovation, organizational innovation and innovation, and the "quantity" refers to the enterprise fully using internal and external resources to achieve sustainable growth, expansion, seeking sustainable development, sustainability and development is in terms of the amount of business growth the most direct expression. From the perspective of financial analysis, to study relationship between the capital structure and the growth of enterprises,I choice the financial indicators which can be quantified to measure growth.Taking into account the growth is a comprehensive index, if only use a single index to represent the growth is one-sided, so this article from the four aspects of profitability, operation ability and development ability, the DBel of investment income selected12financial indicators to characterize the growth, by using SPSS software, using the method of principal component analysis to reduce the dimension, to the12indexes of extraction factors, grow comprehensive score.Due to different industry capital structure is different, some industry maintain a high DBel of debt, but some industry debt rate is very low. Moreover there are considerable differences in business characteristics and industrial policy. National policy support some industries,but limit the development of some other industries at the same time. Industry difference is considerabe significant, not easy to compare, in order to enhance the comparability, I only choose an industry to study. Taking into account the number of manufacturing enterprises accounted for more than the total number of50%listing Corporation, the sample is representative, and compared with other industries, manufacturing business is relatively stable, so this paper chooses to research in manufacturing industry.This paper select theoretical and empirical analysis, empirical research on the basis of theoretical analysis,combine theoretical analysis and empirical analysis.In review of the agency cost theory, trade-off theory and the enterprise life cycle theory, capital structure and enterprise growth theory ect, combing, summarizing the results of previous studies related to the capital structure and growth,I put forward the research assumption of this paper. The principal component analysis of the growth of the score by statistical software SPSS, the ordinary least squares (OLS) regression analysis. Drowing on previous research results, the rate of return on net assets (ROE) as the division standard,I has divided the sample into two types of good or poor business performance.At last, two kinds of samples were carried on the regression analysis.This paper consists of six chapters, the specific content of each chapter is as follows:The1st chapter is introduction.The introduction describes the research background, research significance, research ideas and research methods, and at last puts forward the innovation and the insufficiency of this paper.The2nd chapter is theoretical basis.In this chapter, I has reviewed the MM theory, agency cost theory, signaling theory, trade-off theory ect capital structure theory,and and then the theory of corporate life cycle theory of growth which laied on the theoretical foundation for the later empirical analysis.The3rd chapter is literature review.In this chapter, the capital structure and growth of literature reviews at home and abroad are reviewed, carded,and summed up.We can draw a conclusion that the relationship of the capital structure and growth at home and abroad have not reached the same conclusion so far.Most of foreign scholars believe that the relationship of the capital structure and growth is negative correlation,but some other believe positive correlation or no related;Domestic scholars then also did a lot of research, and obtained three distinct conclusionsd-the positive correlation, negative correlation or no related.The4th chapter is research design.Through theoretical analysis, this paper put forward the hypothesis:when a company’s business performance is relatively good,the relationship of the capital structure and growth is postive correlation,and when business performance is relatively bad, the relationship is negative correlation.And I further put forward that the scale of company will affect the,the relationship of the capital structure and growth-the large SIZE of the company, capital structure is more significant to influence the growth.After put forward the hypothesis, this chapter has explained the sample selection, sample source, variable definitions,and the reason of selection of these variables.The5th chapter is empirical test.After the previous chapter’s oretical analysis, literature review, research design, this chapter has made an empirical test. Because the dependent variable growth is a comprehensive index, to calculate dimension reduction extraction factors by principal component analysis, this part do principal component analysis at first. In principal component analysis,12indexes we growth on characterization of correlation analysis, and then use KMO test and Bartlett test of sphericity to verify the suitability of the principal component analysis, after verification, that these12indicators suitable for principal component analysis, then, we began to extract factors, then, select the factor accumulation contribution rate of more than80%instead of the original index, factor here is greater than80%of the total of6, according to the principal component coefficients matrix expression to write the selected by a factor of6, and then to F1、F2、F3、F4、F5、F6each principal variance contribution rate as the corresponding weights, the weighted average comprehensive score the growth of the Sample Firms. In the latter part of this chapter,I has performed regression analyses on the two types of samples. First of all, on the whole sample, performance good sample, poor business performance of samples were analyzed by descriptive statistics, and then on the three types of sample correlation analysis, and regression analysis. Through the empirical test, the test conclusions are as follows:1. when a company’s business performance is relatively good,the relationship of the capital structure and growth is postive correlation,and when business performance is relatively bad, the relationship is negative correlation.2. Whether the operating performance is good or bad, the enterprises’scale more large, the effects of capital structure and growth are more significant.3when a company’s business performance is relatively good, the nature of enterprise have no significant difference on the relationship of the capital structure and growth,however,when business performance is relatively bad, the capital structure of STATE-owned enterprises is more significant for growth.The6th chapter is conclusion and suggestion.According to the empirical analysis of the previous results, this chapter has carried on the further analysis, the conclusion of the paper, and put forward the policy suggestion.In this paper, the main innovation points are as follows:1.I has selected12financial indicators on behalf of profitability, operation ability, the DBel of investment income and the DBel of development,so these indicators can more fully reflect the company. 2. The rate of return on net assets (ROE) has been selected as the business performance standards to research effect of capital structure on corporate growth when business performance is good or poor.3.This paper further research that different scale or characteristics of the enterprise whether effect the relationship of the capital structure and growth.