How to adjust the capital structure of enterprises to achieve the best?

The optimal capital structure means that the weighted average capital cost WACC of the capital raised by an enterprise is the lowest in a certain period, so as to maximize the enterprise value.

First, the development of capital structure theory

Capital structure refers to the composition and proportion of various long-term financing sources of enterprises. Usually, the capital structure of an enterprise consists of long-term debt capital and equity capital. Capital structure theory is to study the influence and function of debt on enterprise value under certain conditions, and what kind of asset-liability ratio can maximize enterprise value. From the perspective of development, the capital structure theory has gone through two stages: the early capital structure theory and the modern capital structure theory.

(A) the early theory of capital structure

Generally speaking, the early capital structure theory lacked a solid theoretical foundation and was eliminated with the development of modern financial theory, but its basic ideas are still the basis for us to understand the capital structure theory. Mainly: net income theory, operating income theory, traditional theory. Although the early capital balance theory described the relationship between capital structure and company value and capital cost, this relationship was not abstracted into a simple model.

(B) modern capital structure theory

The development of modern capital structure theory is marked by MM theory. 1958, two American professors, Madigliani and Miller, published "The Theory of Capital Cost, Corporate Finance and Investment", and put forward the theory of irrelevant capital structure, which formed the basis of modern capital structure theory. Modern capital structure theory includes: tax-free MM theory, tax MM theory and trade-off theory.

1.MM theory

(1) MM theory does not include tax. The MM theory without tax is also called the capital structure irrelevant theory. It believes that increasing the company's debt cannot improve the company's value, because the benefits brought by debt are completely offset by the risks it brings at the same time. There are two main conclusions: in the absence of enterprise income tax, the value of leveraged enterprises is equal to that of non-leveraged enterprises, that is, the value of companies is not affected by capital structure; The cost of equity capital of leveraged enterprises is equal to the cost of equity capital of non-leveraged enterprises with the same risk level plus risk premium, which depends on the debt ratio.

Although the theory of tax-free capital structure only draws a blind and simple conclusion, it finds the relationship between capital structure and company value and is regarded as the starting point of modern capital structure theory.

(2) MM theory and taxation. MM theory with tax eliminates the assumption that there is no corporate income tax. It believes that the value of the company will increase with the increase of the debt ratio, because the debt interest can be offset. Enterprises can increase their liabilities indefinitely, and the value of enterprises will reach the maximum when the liabilities are 100%. There are two main conclusions: the value of leveraged enterprises is greater than that of non-leveraged enterprises; When there is tax, the cost of equity capital of leveraged enterprises is equal to that of non-leveraged enterprises with the same risk level plus risk premium, but the risk premium depends not only on the debt ratio, but also on the income tax rate.

2. Weighing theory

On the basis of MM theory, the trade-off theory further develops the capital structure theory, relaxes all kinds of assumptions other than complete information, and considers how the capital structure affects the market value of enterprises when the debt interest tax deduction, bankruptcy cost and agency cost exist separately or together.

According to the trade-off theory, an enterprise has an optimal capital structure, but it is difficult to accurately estimate the financial crisis cost and agency cost, so the optimal capital structure cannot be obtained through calculation and pure theoretical analysis. Theoretically, the best capital structure is the capital structure that makes the weighted average capital cost of the enterprise lowest and the enterprise value highest. In fact, the determination of the optimal capital structure needs to be judged and selected by various factors that affect the capital structure except enterprise value and capital cost.

Second, the best capital structure of enterprises

(A) the concept of optimal capital structure

The optimal capital structure refers to the capital structure that makes the comprehensive capital cost of enterprises lowest and maximizes the value of enterprises under certain conditions in a certain period of time.

(B) Macro factors affecting the optimal capital structure of enterprises

1 economic cycle

Under the condition of market economy, the economy of any country will not grow or decline for a long time, but develop in fluctuations, generally showing a cyclical cycle of recovery, prosperity, recession and depression. Generally speaking, in the stage of economic recession and depression, due to the overall macroeconomic depression, most enterprises have difficulties in operation, and their financial situation is often in trouble or even worse. In this regard, enterprises should reduce their liabilities as much as possible, or even adopt a "zero debt" strategy. In the stage of economic recovery and prosperity, generally speaking, because the economy is out of the trough and the market supply and demand are booming, most enterprises have stable sales and rising profits. Enterprises should increase their debts decisively and expand their scale rapidly, and should not give up good development opportunities in order to minimize the cost of capital.

2. National macroeconomic policies

The state regulates the macro-economy through monetary policy, tax policy and policies that affect the development environment of enterprises, and indirectly affects the capital structure of enterprises. Macro-monetary policy changes the relationship between money supply and capital supply and demand through transmission mechanism, which leads to interest rate fluctuation. This kind of interest rate fluctuation will affect the capital structure of enterprises. If the interest rate of bank loans is low in a certain period of time, the proportion of debt funds in the capital structure will increase relatively; On the contrary, the proportion of debt funds will decline. Tax policy determines that different industries implement different tax rates. In some industries with extremely low income tax rate, the financial leverage is not great, and the tax reduction benefits brought by debt financing are not many, so it is better to have a smaller proportion of debt funds; On the contrary, in some industries with higher income tax rates, financial leverage is greater, and debt financing brings more tax reduction benefits. Therefore, such enterprises should choose a capital structure with relatively large debt capital.

3. Market competition environment faced by enterprises

Even if enterprises are in the same macroeconomic environment, they should not generalize their debt levels because of different market environments. Generally speaking, if the competition in the industry where the enterprise is located is weak or in a monopoly position, such as telecommunications, electric power, tap water, gas and other enterprises, because there will be no problems in sales, there will be no big fluctuations in production and operation, and profits will grow steadily, the debt ratio can be appropriately increased; On the contrary, if the industry in which the enterprise is located is highly competitive, such as home appliances, textiles, real estate, etc. Because its sales volume is completely determined by the market, the price is easy to fluctuate, and the trend of profit equalization makes the average profit even lower. Therefore, it is not appropriate to raise funds through debt too much.

(C) Micro-factors affecting the optimal capital structure of enterprises

1. Enterprise asset structure

The asset structure of an enterprise is the proportion of all the components that constitute all the assets of an enterprise. Different types of enterprises have different asset structures, which will affect the channels and methods of financing, and then form different asset structures. If the enterprise has more fixed assets, it should consider the characteristics of large investment in fixed assets and long payback period, and generally raise funds through long-term borrowing and stock issuance; If an enterprise has more current assets such as inventory and accounts receivable, it will generally raise funds through current capital liabilities; Companies in high-tech industries have less debts and generally adopt equity capital financing.

2. The solvency of enterprises

Through the analysis of the original current ratio, quick ratio, asset-liability ratio, interest guarantee multiple and other indicators, evaluate the solvency of enterprises. Enterprises should determine the debt-to-capital ratio in their capital structure according to their solvency. If the solvency of an enterprise is quite strong, the debt ratio in the capital structure can be appropriately increased and the debt structure can be reasonably determined, so as to give full play to the financial leverage and increase the profits of the enterprise.

On the contrary, if the indicators fail to meet the prescribed boundary requirements, indicating that the solvency of enterprises is weak, they should not be over-indebted, but should adopt equity capital financing methods such as issuing stocks.

3. Operational risk and financial risk

Operating risk refers to the risk related to the operation of an enterprise, which is the uncertainty of the income before interest and tax brought by the production and operation of an enterprise. If the enterprise operates extensively, it will lead to low profitability, and it is difficult to raise funds through retained earnings or other equity capital, so it has to raise funds through liabilities, which will inevitably lead to an increase in the proportion of liabilities in the capital structure and lead to financial risks. When all the capital of an enterprise is its own capital, there is no financial risk brought by financing. When some enterprises borrow money, there are financial risks under the action of financial leverage principle. However, if enterprises use operating leverage and financial leverage at the same time, there are both operational risks and financial risks.

Third, the analysis of the capital structure of enterprises in China.

The capital structure of enterprises in China is not the product of a complete market economy. According to the western capital structure theory, judging by the lowest weighted average cost and the largest market value of enterprises, the capital structure of enterprises in China has the following problems.

(A) The asset-liability ratio of enterprises is generally high.

In the absence of internal financing, enterprises can only rely on external capital supply. For a long time, the single financing system has restricted enterprises from replenishing funds from the external capital market, so enterprise financing has long relied on bank loans, forming a high debt ratio. At present, China's enterprises have too many current liabilities and less long-term liabilities. Current liabilities are characterized by short term and high risk. The current liabilities of enterprises are too high, which directly leads to great debt repayment pressure and high debt risk.

(B) the ownership structure is unreasonable

The ownership structure reflects the degree of diversification and centralization of enterprises, thus reflecting the property right structure and governance structure of enterprises. At present, China enterprises mainly include state-owned shares, legal person shares, individual shares and foreign-funded shares. State-owned shares and legal person shares occupy an absolute controlling position, the proportion of public shares is small, and it is difficult to form an effective corporate governance structure because of the lack of restraint and supervision mechanism for state-owned property rights.

(C) the lack of flexibility in the capital structure of enterprises

In the fierce market competition, it is necessary for enterprises to maintain a certain degree of capital structure flexibility in order to flexibly adapt to the financial market. In China, most enterprises have narrow financing channels and mainly rely on state investment and bank credit funds. Moreover, the long-term operating efficiency is low, and they are in arrears with each other, which seriously damages the credit of enterprises, and it is difficult for enterprises to obtain the qualifications for issuing stocks, corporate bonds and other securities.

Fourth, the optimization countermeasures of China's enterprise capital structure

1. Improve the profitability of assets and strengthen the self-accumulation ability of enterprises.

One of the main reasons for the continuous precipitation of corporate debt is the low profit level, inefficient assets and the serious weakening of the self-accumulation mechanism of enterprises. Therefore, in order to enhance the internal financing ability, we must strive to improve the profitability of enterprise assets and increase the self-accumulation of enterprises.

2. Realize equity diversification and improve financial risk management.

Enterprises in China rely on the high-debt development model mainly based on bank loans, which has great financial risks, and the potential financing cost will definitely increase, thus affecting the maximization of enterprise value. Therefore, we should pay attention to the diversification of equity financing, adopt internal employee shares, option shares, introduce strategic investors, make full use of private capital and other direct financing methods to avoid excessive debt ratio and reduce corporate financial risks. Financial risk management includes two meanings: one is the arrangement of short-term liabilities and long-term liabilities; The second is the opportunity to obtain funds and repay debts. The amount and term structure of creditor's rights financing should match the cyclical fluctuation of enterprise's production and operation, avoid unreasonable creditor's rights financing arrangement causing debt repayment peak and idle funds at a certain point, make full use of existing creditor's rights for financing, do a good job in stock management, and avoid the bankruptcy of enterprises caused by payment crisis.

3. Give full play to the function of the bond market and improve the efficiency of the capital market.

The main characteristics of China's capital market are the rapid development of the stock market and the relatively slow development of the corporate bond market, which is not conducive to the reduction of corporate financing costs. China enterprises show a strong preference for equity financing, which is contrary to the analysis conclusion of MM theory, because the qualification examination and certification of issuing bonds in China is much stricter than that of listing stocks. Obviously, the higher threshold for issuing bonds weakens the desire of enterprises to pursue debt and tax savings. With the development of China's securities market, while vigorously developing direct financing through the securities market, we actively use debt financing, especially by issuing corporate bonds and convertible bonds to raise funds.

4. Improve the corporate governance structure and establish a dynamic optimization mechanism of capital structure.

Under the condition of perfect market economy, through the financial constraints on investors and the interaction of various constraint mechanisms such as capital market, manager market and banking institutions, the behavior of company operators is controlled under the condition of separation of the two rights to ensure the fundamental interests of investors. In view of the distortion of the capital structure of listed companies, China should establish a structural dynamic optimization mechanism of the capital structure. Enterprise capital structure should be coordinated with enterprise development strategy and constantly adapt to the requirements of development strategy for capital structure. For any enterprise, because the relationship between supply and demand in the market is constantly changing, the composition of capital is also constantly changing, and the capital structure is always in a dynamic state. For the management of capital structure, we should strengthen the financial budget constraint of the company, strengthen the supervision of investors on the company, establish a profit sharing plan, make the company form an effective incentive mechanism and restraint mechanism, and urge operators to consciously borrow money to raise funds.