A Study Of Return Rate On Capital Of A-share Listed Companies And Its Influencing Factors

Companies' investment decision-making is one of the core issues in financial research.The investment is essentially a cross-period transformation of products(Cochrane,1991).Managers consider marginal rates of transformation,i.e.the return rate on capital when making investment decisions.On the one hand,the level of return rate on capital reflects the profitability of companies' investment.On the other hand,because return on capital has an indicative effect on investment,the factors that determine the return rate on capital are identified.Therefore,it is of great significance to measure the level of return on capital and to identify its influencing factors.From the point of view of enterprise managers,this paper introduces capital adjustment cost in companies' production process and debt in financing process.By transforming the Euler equation of investment obtained in the process of maximizing companies' value,the formula of return rate on capital is obtained.The key of calculating the return rate on capital in this paper is to estimate the parameter of adjustment cost.This paper adopts the GMM estimation whose moment condition is the Euler equation of investment.Drawing on the ideas of Campbell(1991)and Campbell&Shiller(1988),this paper makes logarithmic linear decomposition of return rate on capital from the perspective of asset pricing,then obtains short-term and long-term influencing factors,and further decomposes the unexpected return rate on capital from the both perspectives of income and cost.Finally,the unexpected return rate on capital is decomposed into the current production cash flow growth,the news about future production cash flow growth,the news about future return rate on debt and the news about future return rate on equity.PVAR model is used to solve the problem of variable prediction.Based on the sample of A-share listed companies from 1998 to 2016,this paper calculates the level of return rate on capital in 25 industries,obtains the influencing factors and calculates their respective contributions.The empirical results of this paper show that:(1)The average rate of return on capital is 23.72%among industries,and the overall of the market is about 15.71%.The profitability of companies is good,but the return rate on capital among industries is quite different.The SFC emphasizes that the quality of listed companies should be improved,so the industry with low return rate should be paid more attention to.In addition,it is necessary to optimize capital allocation among industries and to divert capital from industries with low return rate to industries with high return rate,so as to improve the overall return on capital in the market.(2)The five-year moving average of return shows that 24 industries have a significant downward trend around 2010,but the downward trend and the current level of different industries are different.The decline trend of micro-return on capital is consistent with that of macro,the decline of both shows that there is downward pressure in the current macro-economic environment.(3)For all industries,the current production cash flow growth is the most important factor affecting the return rate on capital.In 17 industries,the news about production cash flow growth is the second largest factor.Compared with the co st(the news about future return rate on debt and the news about future return rate on equity),the income(the current production cash flow growth and the news about production cash flow growth)has more explanatory power.In addition,the decomposed factors which influence the rate of return on capital are consistent with those factors influencing investment in Chen et al.(2016).This aspect proves the reasonableness of this decomposition,and it also finds out the factors influencing the investment from the angle of the return rate on capital.