Enterprise Life Cycle, Agency Cost And Capital Structure Adjustment

Capital structure theory is one of the most important financial theories.Its research results form a theoretical framework of modern capital structure based on MM theory,including signaling theory,pecking theory,agency cost theory,control theory,product factor theory,market timing theory,dynamic capital structure theory and so on.Thanks to the development of econometrics,the theory of dynamic capital structure has developed rapidly in recent years.The theory holds that due to contingency and transaction costs,the deviation of the actual capital structure from the target capital structure becomes a normal state.Only when the income generated by the capital structure adjustment exceeds the adjustment cost,can enterprises be willing to adjust the capital structure.In addition to external factors,as an important object of internal governance,the impact of the agency problem on the dynamic adjustment of capital structure cannot be ignored.According to principal-agent theory,when the interests of principal and agent are inconsistent,managers tend to pay less attention to the interests of investors and pursue their own utility and wealth maximization,resulting in high on-the-job consumption and moral hazard,which is a high agency cost for enterprises.The formation and development of enterprises have some forms of life.There are differences in production,operation,organizational characteristics and the relationship between investors and managers at different stages of the life cycle of enterprises.Furthermore,the severity of agency problems faced by enterprises at different stages of their life cycle varies,which will inevitably affect the dynamic adjustment of capital structure and capital structure.This paper makes an important attempt on the basis of less relevant research,choosing manufacturing listed companies listed on A-shares in Shanghai and Shenzhen Stock Exchanges from 2012 to 2017,using data analysis tools such as CSMAR database and Stata 12.0.The article uses cash flow portfolio method to divide the life cycle of enterprises,discusses the difference of capital structure adjustment in growth,maturity and recession periods,the relationship between agency cost and the speed of capital structure adjustment,and the interaction effect between enterprise life cycle and agency cost,and uses GMM method to test the hypothesis model.Four main research results are obtained.Firstly,the target capital structure of an enterprise can be fitted by the characteristics of the company.By using the linear relationship relationship model of five characteristic factors of company size,profitability,solvency,non-debt tax shield and asset tangibility,the target capital structure is reasonably fitted,and the result is remarkable,and the goodness of fit of the model is about 0.6.Secondly,there are significant differences in the speed of capital structure adjustment in different life cycle stages.Based on the theory of enterprise life cycle and using Dickinson's cash flow portfolio method for reference,this paper divides the sample enterprises,and makes descriptive statistics on the quantity distribution of the sample enterprises in growth,maturity and recession periods.The paper compares the differences of the adjustment speed of capital structure in different life cycle stages by grouping regression with partial adjustment model,and finds that the adjustment speed of the growing enterprises is the fastest.Thirdly,agency cost has a significant negative effect on the speed of capital structure adjustment.The agency cost is measured by the management cost rate,which is included in the dynamic adjustment model of capital structure.The results show that the agency cost has a reverse relationship with the speed of capital structure adjustment,that is,the higher the agency cost,the slower the speed of capital adjustment.Fourthly,the interaction effect of enterprise life cycle and agency cost on the speed of capital structure adjustment is very significant.Finally,the relevant policy recommendations and possible future research directions are put forward.