Research On The Relationship Between Capital Structure And Profitability

The implementation of the reform and opening up policy has accelerated the development of China's small and medium-sized enterprises which have been made a major part of Chinese enterprises,creating a large amount of fiscal revenue,reducing employment pressure in China,and becoming the backbone of technological innovation.However,the shortage of funds is still the bottleneck of small and medium-sized enterprises.Under this background,the Chinese government has introduced the small and medium-sized board market from the western stock market to provide listing channels for SMEs which have not yet met the requirements for listing on the main board,with a view to optimizing the capital structure of SMEs,addressing the issue of shortage in funds for SMEs,providing financial support for the further development of SMEs,thereby improving the profitability of SMEs.However,the changes in the relationship between capital structure and profitability of SMEs after listing have yet to be verified.As one of the economically strongest provinces in China,Jiangsu Province is also leading China in terms of the development of its small and medium-sized enterprises.Therefore,this paper selects small and medium-sized enterprises in Jiangsu Province as the research object to study the changes of the relationship between capital structure and profitability of SMEs before and after being listed.Based on the theory of the influence of capital structure on profitability,this paper constructs three regression models of creditor structure,shareholding structure and profitability,and selects research objects from the enterprises listed on the small and medium-sized board in Jiangsu Province from 2002 to 2015.The data from the two years before listings and the three years after listings were sampled for the total sample and regression analysis before and after listings.The regression results show that for SMEs,the reduced asset-liability ratio is conducive to the profitability to a certain degree.And the asset-liability ratio plays an even more obvious role in profitability after listing.The effect of liquidity ratio on profitability is always positive,but has weakened after listings.For sample companies,increasing equity concentration before listing hinders corporate profitability.However,the opposite is the case after listings.In order to make regression results more reliable by avoiding pseudo-regression,this paper carries out endogeneity test and robustness test on the three models after the empirical regression.The results show that there are noendogeneity problems in the three models,and the baseline regression results in this paper are robust.Based on the results of empirical analysis,this paper proposes policy recommendations in the following aspects: First,we must take measures to give full play to the creditor governance mechanism.Second,the existing debt financing channels of enterprises must be expanded.Third,the equity of enterprises must not be excessively decentralized after listings.It is necessary to maintain a moderate concentration of equity and make full use of the board of supervisors.Finally,the investment in intangible assets of small and medium-sized enterprises must be increased so as to improve their innovative ability.