The Research On Moderating Effect Of Capital Structure On Relationship Between Earnings Persistence And Enterprise Value

Nowadays, situations including stock market bubble bursting and shareholder interests seriously being damaged appear frequently. We trust strongly that all the problems come from how to improve enterprise value. Since then enterprise owners and manager have to think twice about two important things which are enterprise sustainable development and enterprise value creation stimulation. There are several problem cannot be ignored during enterprise developing. Firstly, financing environment is relatively poor. Compared to state-owned enterprises, private enterprises have more barriers in terms of financing. To some extent, financing become a bottleneck in private enterprises development and growth. Faced with fierce competition of financing resources, private enterprise should make efficient financing decision in order to reasonably determine a best capital structure for them own. Secondly, managers overall get poor management ability. Under the Corporation’s principal-agent model, the enterprise managers always make decisions departing from the owner’s interests. What’s more, they also implement centralized management including frequent manipulation of profits and cash flow. This not only reduces enterprises’ earnings quality and sustainability, but also greatly harms investor interests. Thirdly, managers make decisions blindly and operate risky. On one hand, there are some listed companies underutilize debt while there are other listed companies have excessive debt, all this resulted in high business risks. On the other hand, the debt timing structure cannot match well with the lifecycle of corporate assets. This possibly leads to situations that cash flow from operating may not fully pay debt interests, making the enterprises facing default risk and getting into financial trouble. The aim of the essay is to solve these three problems and apply some significant recommendations for listed companies to improve their management and enhance their governance efficiency. It will be good for enterprises long-term development.Because of the importance of capital structure in enterprises’ development, we should take it into consideration in increasing enterprise value and enhancing enterprise value creation ability. The existing literatures find the best capital structure through capital structure-enterprise value model from the enterprise value perspective while this dissertation find the best capital structure through capital structure-earnings persistence-enterprise value model from the enterprise value creation perspective. This model not only shows that earnings persistence is an important way to increase enterprise value, but also studies the influence of capital structure to relationship between earnings persistence and enterprise value. It focuses on the generation process of economic consequences and it will be helpful to solve those problems from the source. This influence is moderating effect of capital structure in relationship of earnings persistence and enterprise value. We can know the best capital structure through studying the characteristics of moderating effect and the ability of earnings persistence creating enterprise value is strongest at the same time.Through collecting useful listed company data from 2009 to 2013, I did empirical analysis towards moderating effect of capital structure in relationship of earnings persistence and enterprise value. Firstly, doing literature review related with capital structure, earnings persistence and enterprise value. Secondly, analyzing whether the moderating effect of capital structure exists based on enterprise value model and capital structure theory including signaling theory and agency theory. Then put forward empirical research hypothesis based on analysis. After that is empirically testing those hypotheses using descriptive statistics method, correlation analysis method, subgroup analysis method, quantile regression method and other statistical methods. During testing, I not only tested the listed companies as a whole, but also tested the listed companies in different industry teams. This is a breakthrough think and it can objectively and comprehensively verify the differences of capital structure’s moderating effect among different industries so that the study is practical and significant. At last, I used hierarchical regression method to do robust testing in order to assure the previous outcome. Above all, I could draw conclusions and propose management significance as well as show several innovations of this paper.The study has found several meaningful conclusions. From the attribute perspective of capital structure, the moderating effect of capital structure is a nonlinear form which is inverted U-shaped while the moderating effect of capital structure is a linear form from the debt timing structure perspective. Meanwhile, it reveals the distribution of capital structure’s moderating effect through quantile regression analysis. From the attribute perspective, when the capital structure locates in the low area(the asset-liability ratio is relatively low), the greater the enterprise value, the greater the enlarging effect of capital structure, when the capital structure locates in the high area(the asset-liability ratio is relatively high), the larger the enterprise value, the smaller the inhibitory effect of capital structure. From the debt timing structure perspective, the short-term debt ratio is positively related to the ability of earnings persistence creating enterprise value. At last, we can get useful suggestions to increase enterprise operating efficiency based on above conclusions.