Kelationship Between Financing Structure And Idiosyncratic Risk

Idiosyncratic volatility is the risk that only belongs to an enterprise,which is different from the systemic risk.As we all know,the traditional asset pricing theory established we can often raise money when we need money or we can do some investment when we have sufficient fund with the risk-free rate,a large number of investors see eye to eye to stock returns and the basic tax rate and the transaction costs can be ignored,the market information is completely open,when we have asset portfolios which contain lots of types of assets,the non-system risk of enterprises often can be dispersed.In my article,we can do research on the relation between the corporate financing structure and its idiosyncratic risk,corporate financing structure is always the problem needed to be considered in the corporate finance.The financing strategy often reflects the company's financial policy,also,it has close relation with corporate operating strategy.The difference between the financing term structure and the source of fund often reflect the performance of the company's historical operation,and the risk also reflect the possibility and the risk faced in the future development of the company.When the company adopt different financing strategies,we can find that the different corporate operating strategy often lead to the market increasingly fierce competition,and the fierce competition between companies tend to affect the business environment,the changes in the competitive environment will also intensify product market stock volatility.The financial structure of the company will undoubtedly affect the stock's idiosyncratic volatility which will also affect the specific risk of stocks,as a financial signal released by the corporate governance.Based on the relevant literature at home and abroad,the paper chooses the time interval of 2005-2016 years,and the sample data is mainly about the listed companies between Shanghai and Shenzhen A share which do not contain financial stocks,we can make an empirical analysis of the relationship between corporate financing structure and stock specific risk.The main conclusions of this paper are listed as follows,firstly we can find different sources of fund have influence on stock idiosyncratic risk,when the scale of endogenous financing decreases,the idiosyncratic risk will increase.And we can find that the proportion of the stock of debt financing is positively related to the idiosyncratic risk.The proportion of the stock of equity financing is negatively related to the idiosyncratic risk,then we can find the proportion of different financing maturity structure will have an important impact on the specific risk of stocks.The higher the proportion of short-term liabilities and long-term liabilities,the greater the idiosyncratic risk of stock.From point of the research,the company financing structure have different effects on stock price volatility,different financing strategies will make different signals to the market,with more short-term debt will increase the company's idiosyncratic risk,with more internal financing can release the signal about the better performance of the company to the market,in order to alleviate the stock return volatility,stable and improve the performance of the company,the company performance can be more stable,the endogenous financing,to minimize the use of the proportion of short-term debt,use much more long duration of the debt to raise funds,can further reduce the heterogeneity of enterprise stock price volatility.