Empirical Study On Relationship Of Capital Structure And Corporate Performance Of The Companies Listed On GEM In China

Different schools of theory study capital structure from different views and draw various conclusions. But all schools have a common understanding that capital structu re and corporate performance can be improved by researching the specific relationshi p between them. Growth enterprise market(GEM) promotes small and medium-sized enterprises(SMEs) forward rapidly by providing a financing platform. So it is an im portant supplement of Chinese main board market. However, some companies listed o n GEM can be found unreasonable capital structure and performance polarization gra dually. The research on the relationship between corporate performance and capital st ructure and their negative parts is limited in China. Because of the importance of G EM, this article studies the relationship between capital structure and corporate perfor mance by choosing companies listed on GEM as the research object.The research of relationship between capital structure and corporate performance is unidirectional and based on single equation in previous studies. On account of co mmon effect and endogenous character, the research needs to establish simultaneous e quation models. Meanwhile, most scholars consider non-interest-bearing liability when asset-liability ratio is chosen as substitution variable of capital structure. Although n on-interest-bearing liability can raise certain fund for the company, its financing capa city is limited. It cannot generate tax shield without interest because of originating in operation of enterprise rather than fund raising behavior. So this article takes no acco unt of the effect of non-interest-bearing liability and selects short-term interest-bearing liability ratio as substitution variable of capital structure besides asset-liability ratio.Above all, writer reviewed correlation theory and literature of capital structure a nd corporate performance. Then, the current situation of capital structure and corporat e performance in companies listed on GEM has been analyzed. At last, the relationsh ip between these two factors has been studied by empirical analysis. This article sele cts the data from 2012 to 2014 as samples. The number of the enterprises is 281 in2012, 355 in 2013 and 355 in 2014. Total assets debt ratio, Tobin'q, short-term inter est-bearing liability ratio and asset-liability ratio are chosen as substitution variable of capital structure and corporate performance. And the overall and annual sample data will be analyzed with description, correlation and simultaneity. Simultaneous equation will be estimated by three-stage least square. It concludes that short-term interest-bear ing liability ratio, asset-liability ratio and corporate performance show negative correla tion for each other.