A Research On The Impact Of Heterogeneous Beliefs Upon Capital Structure Of Chinese Listed Companies

Most existing literatures follow the classical financial theory which is based onrational man hypothesis and efficient market hypothesis. These literatures study theinfluencing factors of capital structure from the company factors (financial condition,internal governance, etc.) to the macroeconomic environment factors, but there is littleliterature to discuss the problem from the perspective of investors’ non rational factors.Traditionally, heterogeneous beliefs and capital structure are relatively independent. Inrecent years, scholars at home and abroad have conducted manyresearches on heterogeneous beliefs and asset pricing mode, but the direct studyof heterogeneous beliefs and capital structure is not much. Combining with thecharacteristics of China’s capital markets and the development status of corporatefinance, this paper takes a sample of513listed companies from2003to2012of A-sharecompanies listed in Shanghai and Shenzhen Exchanges to examine the relationshipbetween heterogeneous beliefs and capital structure.In the theoretical deduction part, with the help of existing research literature,focusing on the relationship among heterogeneous beliefs, liability-asset ratio and thecapital structure adjustment speed, this paper puts forward the hypotheses.In the static model, according to the size of investors’ heterogeneous beliefs, thispaper intuitively compares the mean and the median of corporate capital structure. Then,controlling some related variables, we empirically test the sample data by doingfixed-effect regression. The result shows that capital structure negatively correlates withheterogeneous beliefs. In the dynamic part, this paper uses many methods to estimatethe speed of capital structure adjustments with partial adjustment model. The resultsshow that, considering the investors’ heterogeneous beliefs, system GMM and pooledOLS are more effective to estimate the speed of capital structure adjustments withChina’s listed companies, and the estimated average adjustment speed of the marketdebt ratio is32.43%~43.08%. The paper also finds that heterogeneous beliefs and itschange, significantly affect the company’s capital structure adjustment,In the last part of the article, the existing study limitations and future researchdirections are discussed.