Study On The Relationship Between Corporate Capital Structure And Stock Liquidity In Chinese Market

Stock liquidity and corporate capital structure have always been the hot issues in the field of financial research and corporate finance.Capital structure is the mutually balanced result of the enterprise's debt financing and equity financing in a certain period.For the enterprises,a reasonable way of financing can lead to healthy,stable and long-term development in the future.At the same time,with the constant development of the stock market,it plays an increasingly important role in our social economy.The securities market has become the essencial external environment for the enterprises to raise money as well.Nowadays,more and more domestic and foreign scholars focus on the relationship between the capital structuer and liquidity.Threrfore,based on the previous studies,this paper combines the capital structure theory of Corporate Finance with the market microstructure theory of Finance and further investigates the two-way relationship between the corporate capital structure and the stock liquidity.The results show that there is significant correlation between the capital structure of the listed companies in China and the stock liquidity.Our results are threefold: 1)the higher the stock liquidity,the smaller the targeted capital structure;2)in order to achieve the maximization of firm value,firms will adjust toward capital structure targets.However,because of the influence of the adjustment costs,the adjustment is only partial;3)the adjustment behavior of the capital structure will have a significant positive feedback effect on the liquidity as well.The reduction of the capital structure can make the stock liquidity decrease.Therefore,this paper shows that the relationship between liquidity and capital structure is in a dynamic equilibrium process of adjustment on the whole.Finanlly,this paper summarizes the results of the empirical research above and makes some suggestions from the viewpoints of regulators,investors and enterprises.What's more,the paper also points out the shortages of our research and shows the direction of future efforts.