Research On The Adjustments Of Capital Structure Based On Financial Contingency Theory

Since the advent of MM theory,academics at home and abroad have been keen to research the corporate capital structure.However,the academic community has always focused on the empirical study of capital structure but has neglected the importance of case studies.As a rising star in the coal industry,WETCL has risen rapidly through a strategic transformation in just a few years.From the perspective of the case study,this article specifically analyzes the capital structure adjustment of WETCL,enriching the research scope of capital structure,and providing the reference for the strategic transformation and capital structure adjustment of coal companies.Based on studying the theory of capital structure and summarizing previous literature,this paper selects the theoretical framework based on trade-off theory,pecking order theory and market timing theory,and financial contingency theory,using the listing data and information of WETCL from 1998 to 2016,analyzing from the four dimensions of path dependence,external factors,internal factors,and sustainable development.It has been found that the company has a target capital structure and continuously adjusts for it.With the strategic transformation,low profitability and debt financing preference,the company's asset-liability ratio has continually increased.This paper proposes to clarify development strategy,improve profitability and reduce the proportion of debt financing in company level,as well as increase government's support for transformation enterprises and take advantage of the “One Belt and One Road”strategy and other government-level recommendations.And based on the research,this paper sums up general recommendations to enhance the company's profitability,clarify of business development strategy and other industry-level recommendations.