Empirical Study Of Enterprises Life Cycle And Capital Structure

Capital is the key to the survival and development of enterprise, while the raising and reserving of which is important for production, management, investment and other following activities. With the economic restructuring and reform of the investment and financing system, the problem of financing of listing Corporation has been concerned. However, as a very important content of finance and financial field, it has been a complex problem that has always bothered researchers to set the proportion of the debt capital and equity capital in capital structure of enterprise. Because of the dynamic changing process in which enterprises are in, there are different financial characteristics and operating risk in different stages, while the level of capital structure also changes. It will only get the result of vague values which represents capital structure without researching in different stages of it. Therefore, it is of theoretical and empirical value to research the differences and influencing factors of capital structure in every stages.This article starts from the "Financial growth cycle theory" of Berger and Udell. Through the relevant literature research, we find that the research of the relationship between life cycle and capital structure of scholars only reveals the differences of capital structures of enterprises which are in different stages of life cycles. However, when it comes to problems as what the financial leverage of every cycle is, it doesn’t reach an agreement. This is what we are trying to figure out. Firstly, we pick a sample of manufacturing industries which are in CSI 300 from 2009-2013. Secondly, we use the average of increase rate of main business revenue of continuing 5 years and the positive and negative sign of cash flow as a combination to determine the different stages of life cycles. Thirdly, we expect to examine the applicability of the Inverted U type model in the theory of finance life cycle, to argue that there are significant differences in every stage of capital structure from a series of work consisting of descriptive statistical analysis, K-W and other non-parametric tests, panel data model construction and the method of substitution of main variable index. Lastly, we will analyze the factors which influence the capital structure from the result of regression of panel data and try to find the reason of the differences.Through empirical research, the conclusion has been made as following.(1)the converted U type has been verified to have a good applicability of the changing trend of capital structure of manufacturing industries in CSI 300. Apart from the year of 2009, the mean and the median of debt to assets ratio give a picture in which the level of debt makes it the top in growth period,second in maturation period and last in recession period.(2)It has been demonstrated that there are significant differences of capital structures in different stages of life cycles no matter what method is used. And it is clear that the debt to asset ratio of enterprises in growth period is higher than that of the enterprises in maturation period and recession period. More exact conclusion is made by LSD examination, which says that the differences of capital structure in growth and maturation period has always been significant, while differences of capital structure in growth and recession period only make it significant in 2010,2011 and 2012.Differences of capital structure in maturation and recession period fail to pass the test.(3) The life cycle factor has also been verified as a effective determiner. When it is put in panel model, not only it passes the test, the lever of adjusted-R also increases. As a result, the debt to asset ration is positive related with growth period and negative related with maturation period.(4)Other factors such as scale(SIZE), profitability(GROWTH)and tangibility also have been proved positively effective to capital structure. Non debt tax shield is negatively effective to capital structure and the influence increases with the accumulation of internal depreciation. However, company’s growth which is represented by increase rate of main business revenue or total assets growth rate has nothing to do with capital structure. This may be caused by the fact of credit rationing in China and other factors such as financing cost,tax policy and so on.