The Diversified Equity Investment Of Listed Company To Its Subsidiaries And Capital Structure

Whether the subsidiaries’s diversification can affect the company’s capital structure? Previous studies from the merger of the overall level of inspection the diversification is one of the important factors affecting the capital structure, but did not take into account when the group through equity investment business sinking to the level of sub company, and in subsidiary shows the distribution of industry diversification, equity investment in subsidiary diversified whether new impact on the capital structure of the company? Different with the existing research, on the one hand, compared and diversification of the sector, led by investment company, a subsidiary of involved industry span greater, between parent and subsidiary companies, operating cycle, circulating capital, capital demand more independent, investment opportunities and cash flow of the low correlation and role of risk diversification is more obvious. On the other hand, the formation of a double agent structure will lead to higher agency costs between the shareholders of listing Corporation, listing Corporation executives and subsidiary executives. Whether these changes will affect the company’s capital structure? And what are the economic consequences of the capital structure of the company? Therefore, this paper to group internal business layout as the breakthrough point, from the risk dispersion and principal agent perspective, long-term equity investment degree increase trend, subsidiary company of industry diversification would affect the capital structure and the economic consequences of the research.This paper took the 2008-2014 listed companies as a sample, analysis and test the equity investment in listed companies to their subsidiaries in the form of enterprise groups in China, business group in the degree of diversification of the subsidiary level how to influence the company’s capital structure and its dynamic adjustment speed. Study found that:(1) compared to the low level of equity investment company, to a high degree of equity investment of listed companies, its subsidiaries of industry diversification degree increases, subsidiary of the overall has interest bearing debt financing ratio increased significantly; (2) compared to the low level of equity investment company, to a high degree of equity investment of listed companies, its subsidiaries of industry diversification degree increases, the speed of dynamic adjustment of corporate capital structure will be significantly decreased.Innovation of researching:(1) the investigation of business between the subsidiary of transverse distribution of deep within the group on the capital structure influence. It is proved that the group internal business structure can significantly affect the group’s financing decision, caused by the capital structure change and enrich the study of influencing factors of the capital structure of the. (2) distinguish between parent company and the subsidiary company’s capital structure, open the listed company with the overall capital structure. It is proved that the group internal business structure, a subsidiary of the financing capability have significant effects, further open the black box of capital structure. (3) revealed a subsidiary of industry diversification degree increases, aggravate the problem of agency cost and information asymmetry between the parent company and the subsidiary company, management difficulty is significantly increased, thereby affecting the change of company capital structure adjustment speed, opened a new angle of view in the whole study on the speed of adjustment of capital structure dynamic.The significance of this study lies in:(1) the relationship between diversified equity investment and capital structure provides a clear empirical evidence that contribute to further open the black box of financing decisions within the group. (2) it has important practical significance to the development of capital structure optimization and financial decision making of listing Corporation in practice.