Research Of Correlation Between Public Companies’ Debt Financing Structure And Debt Paying Ability

For a company that exists in a highly competitive market, to acquire operating funds by equity financing is not enough for the enterprise to expand its size, increase profit and compete with other competitors. Therefore, for all enterprises, running big amount of debt is always a way used to expand equity and enhance operating efficiency. However, debt will increase the enterprise’s financial risks and challenge the enterprise’s ability to pay back the debt. Thus, how to balance profit and risk, pick the best debt financing structure is an urgent problem enterprise need to figure out.This article, based on risk control and linear regression method, the analysis of 193 local public companies’ 2014 financial reports and deepen research on how the debt structure, maturity structure and relative cost of debt financing make an impact on the enterprise’s short term and long term debt paying ability makes the following conclusion:(1) lower bank loan financing ratio will benefit enterprise’s short term and long term debt paying ability, increase corporate bond financing ratio will higher enterprise’s short term debt paying ability, increase commercial credit financing ratio will higher enterprise’s long term debt paying ability;(2) increase enterprise’s long term debt ratio will enhance its short term debt paying ability, but has no big impact on long term debt paying ability;(3) lower enterprise’s relative cost of debt financing will benefit the enterprise’s long term debt paying ability, but has little impact on its short term debt paying ability.Different from normal way of debt analysis, this article divided the debts into three parts, using linear regression method to analyze the enterprise’s short term and long term debt paying ability, in order to find the key elements that make an impact on enterprise’s short term and long term financial risks. At the same time, prove that the same element may have different ways or levels of impact on enterprise’s short term and long term financial risks. Moreover, this article uses random picked public companies’ latest financial data, which is close to the current overall situation of Chinese public companies. It helps decision makers to make the best choice on debt financing combination when consider the enterprise’s short term and long term debt paying ability.