Capital structure thesis

Capital structure is an important content of enterprise financial management and capital operation, and it is also one of the important topics of modern company financial management research. The following is the content of the paper on capital structure that I collected for you. Welcome to read the reference!

Capital structure paper 1

On Capital Structure and Corporate Performance

The research on the company's capital structure often leads to the opposite conclusion-some research results show that the higher the debt ratio, the better the company's performance; Some research results are just the opposite? This is the so-called mystery of capital structure. In order to solve this puzzle, this paper puts forward a conjecture that the company size may affect the relationship between capital structure and company performance, and makes a comparative analysis of A-share main board and small and medium-sized listed companies respectively, and finds that the relationship between capital structure and business performance of companies of different sizes is really different, which also confirms our conjecture.

Capital structure; Company performance; scale

I. Introduction

The traditional corporate finance theory holds that the capital structure of an enterprise includes the attribute structure of capital and the term structure of capital. The attribute structure of capital refers to the proportion of capital with different attributes (namely debt capital and equity capital) in an enterprise; The term structure of capital refers to the ratio of different term capital (such as long-term debt capital and short-term debt capital). Because the capital structure of an enterprise can affect the financing cost, tax scale and governance structure of the enterprise, thus having a certain impact on the operating performance of the enterprise. Therefore, how to optimize the operating performance of enterprises through the choice of financing methods, that is, how to determine the optimal capital structure, has become a very important issue in corporate finance theory and corporate governance practice.

The exploration and research in this field has initially formed a relatively complete theoretical system, namely the capital structure theory. This theory originates from MM theory put forward by Professor modigliani and Professor Miller: under a series of assumptions, the enterprise value has nothing to do with the capital structure. However, these assumptions are too harsh to be satisfied in reality, and their conclusions are difficult to establish, but they open the floodgates for academic circles to study the optimal capital structure of enterprises. Since then, a large number of scholars have studied this issue. However, the results are quite different, even the opposite. Is this the so-called? The mystery of capital structure? .

Second, theoretical review and literature review.

1. Theoretical review. (1)MM theory. MM theory holds that the company's capital structure has nothing to do with the company's value without considering the company's income tax and business risk, but the capital structure is different. In other words, in the process of the enterprise debt ratio increasing from zero to 100%, the enterprise value and capital cost will not change, that is, there is no optimal capital structure. (2) Modified MM theory. The revised MM theory is a revision and improvement of the original MM theory. Considering the influence of enterprise income tax, it is considered that the use of debt capital can reduce the comprehensive capital cost of enterprises and further improve the company value, because the interest expense of debt capital is tax-free. That is, the company's performance is positively related to the debt ratio, and the debt ratio 100% is the company's optimal capital structure. (3) Miller theory. Morton, one of the founders of MM theory? Professor Miller put forward the so-called Miller Theory in 1976, arguing that the revised MM Theory overestimates the tax shield effect of debt, because the existence of personal income tax partially offsets the interest income that individuals get from investment. However, the interest earned by individuals from investment will not be completely offset, so the revised MM theory is still valid, but the maximum debt ratio is lower than 100%. (4) Trade-off theory. Weighing theory thinks that MM theory ignores two important factors? Financial constraint cost and agency cost, but in fact it may appear as long as debt capital is used. Considering these two factors, although debt can bring tax saving effect to enterprises and increase enterprise value, with the increase of asset-liability ratio, financial constraint cost and agency cost will also increase. Only the capital structure that maximizes the difference between debt tax-saving income, financial constraint cost and agency cost is the optimal capital structure of the company. (5) pecking order theory. Pecking order theory believes that when a company faces financing needs, the optimal financing order is to choose internal financing first, then debt financing, and finally consider equity financing. Moreover, companies with good operating performance are more inclined to internal financing when facing financing needs, that is, the priority financing order of enterprises is internal financing? Debt financing? Equity financing. Therefore, companies with excellent performance tend to have low asset-liability ratio.

2. Literature review. Obviously, all the above theories have some truth, but the conclusions are different. Therefore, many researchers hope to test the influence of capital structure on corporate performance through empirical research. (1) Abroad, Tietmann and Wessels.

(1988) makes an empirical study on the data of 469 listed companies in American manufacturing industry from 1972 to 1982. The results show that corporate performance is negatively correlated with debt ratio. Jordan, lowe and Taylor( 1988) studied the financial data of 275 small and medium-sized British private enterprises from 1989 to 1993, and came to the conclusion that the profitability of the company is positively related to the debt ratio. Frank and Goya(2003) used a huge database of nearly 200,000 observed variables of American non-financial enterprises from 65,438+0,950 to 2000, and the results showed that enterprise performance was positively correlated with capital structure. (2) In China, Yu Hezheng (20 10) made an empirical analysis of agricultural companies listed in Shanghai and Shenzhen stock markets before 2000, and the results showed that there was no significant negative correlation between capital structure and company performance; Wang Juan and Yang Fenglin (1998) selected 46 1 companies involved in 4 1 industries from the listed companies in Shanghai as the research objects, and analyzed their financing structures on 1997, 12 and 3 1. Liu Donghui and Huang Chen (2004) used regression analysis to analyze the market prices of 295 A-share listed companies.

The quantitative relationship between value and capital structure is empirically studied. The results show that the corporate value of listed companies is positively related to the capital structure.

It can be seen that empirical research also draws the opposite conclusion. Does this mean that the relationship between capital structure and corporate performance is not single? Are there any other factors that affect the correlation between the two? In view of this, we put forward a conjecture: the influence of capital structure on company performance may be uncertain, and the relationship between them may also be affected by other factors, such as the scale of enterprises. Therefore, this paper attempts to take large-scale listed companies and small and medium-sized listed companies as the research objects respectively, and through comparative analysis, to explore whether the company size has an impact on the relationship between its capital structure and corporate governance. In addition, this paper also divides the debt ratio into current debt ratio and long-term debt ratio, and studies their respective effects on company performance.

Thirdly, sample selection and model design.

1. Sample selection. Based on the need of comparative study, this paper selects two samples. The selection of samples follows the following principles: (1) Only select one or two most representative enterprises in the same industry or similar industries; (2) Too many culls occurred during the study.

The scale of additional investment or shareholder withdrawal; (3) Financial listed companies are excluded.

Division, because the division of assets and liabilities of financial companies is obviously different from that of companies in other industries; (4) Exclude enterprises that are ST or PT during the study period. According to the above principles, 100 representative companies listed on the small and medium-sized Shenzhen Stock Exchange were selected as the first sample, and 97 representative companies were selected from 300 blue-chip companies selected by the Shanghai and Shenzhen 300 Index as the second sample. The time spans of the two samples are 2005 ~ 20 10 and 2000 ~ 20 10 respectively.

2. Variables and models. (1) Explain the variable. This paper not only examines the impact of asset-liability ratio on corporate performance, but also examines the impact of current liabilities and long-term liabilities on corporate performance. Therefore, the explanatory variables of the model are current debt ratio (CLAR) and long-term debt ratio (LLAR). (2) Explain variables. Obviously, the explained variable is the company's operating performance, while the variables used to reflect the company's performance are the return on net assets, earnings per share and price-earnings ratio. This paper adopts return on equity (ROE). (3) Control variables. In order to enhance the reliability of the model, the growth rate of business income is added as the growth index (ROG), because the growth of a company has a strong correlation with the company's operating performance, and the company's expected growth ability will directly affect the company's current production and sales situation and future operating conditions. In addition, in order to ensure the comparability of data and the convenience of use, the values of five variables, CLAR, LLAR, ROG and ROG, are multiplied by one hundred at the same time, and the percent sign is removed. So, the form of the model is: ROE=? 0+? 1CLAR+？ 2LL

AR+？ 3 log+u, where u is the error term.

3. Source of data. The data used in this paper are all from Wind financial data information terminal and CSMAR database download system.

Fourth, empirical analysis.

Using Eviews6.0 software package, the data of two samples are regressed respectively, and the following statistics are obtained:

From the statistical table of regression results, it can be seen that the explanatory variables and control variables of the two samples are significant at the confidence level of more than 90%, and the results of Ad are significant. R2 and F tests also show that the model is reliable. Therefore, the regression equation of the two samples is:

Sample1:roe =130.68+4.73car+11.04llar10.08rog.

The results show that for small and medium-sized enterprises, the company's operating performance is positively related to its current debt ratio and long-term debt ratio; However, for large enterprises, it is negatively correlated. This confirms our previous speculation that the relationship between capital structure and corporate performance may be uncertain and influenced by other factors.

Cause analysis of verb (abbreviation of verb)

Combined with the corresponding corporate finance theory, this paper believes that the above results may be based on the following reasons: Although the tax-saving effect of debt capital exists objectively, the impact of debt capital on corporate performance is not limited to this aspect. For example, (1) The increase in the asset-liability ratio is bound to be accompanied by the decrease in the proportion of equity capital, so the operating risk will also rise simultaneously, and then the financing cost will rise due to the increase in the demand for risk premium by rational creditors, which will make debt capital have a negative impact on the company's performance. (2) Shareholders who hold a large amount of equity capital of the company are often members of the company's management, and they are most motivated to make decisions that are beneficial to the company's operating performance. The increase of asset-liability ratio means the decrease of the proportion of equity capital, so the incentive for management members to make the most favorable decisions for the company's operating performance will also be reduced, and the cost (time, energy, etc.) will be reduced. ) The optimal decisions made by management tend to be higher. Therefore, with the increase of asset-liability ratio, managers' optimal decision for themselves will deviate more and more from the optimal decision for the company. Whether the debt ratio has a positive or negative impact on the company's performance depends on the comprehensive results of its tax saving effect and other effects. For companies of different sizes, the size and scale of other influences are different, which makes the relationship between capital structure and company performance uncertain.

Abstract of intransitive verbs

The significance of this paper is to put forward a new thinking on the mystery of capital structure, and make a corresponding explanation of the mystery of capital structure through this way of thinking. However, this paper has obvious shortcomings. For example, we can't find an explained variable to reflect the relationship between capital structure and operating performance, but we can only compare the differences between two companies of different sizes to draw the conclusion that company size affects the relationship between capital structure and operating performance. But how does the company size affect the relationship between the two? Is the company size the most important factor? What other factors affect it? These questions have not been answered in this paper, which is also the focus of follow-up research.

refer to

[1] Huang Xian. An Empirical Analysis of Corporate Capital Structure and Operating Performance [J]. Guide to Economic Research .2009 (3)

[2] Liu Donghui, Huang Chen. An Empirical Study on the Relationship between Capital Structure and Enterprise Value [J]. Southern Economy .2004 (2)

[3] Lu. Theoretical Analysis and Empirical Research on Moderate Debt of Enterprises [J]. Economic Research. 1996 (2)

[4] Empirical analysis of the impact of capital structure on operating performance of listed companies in Ma Linmei, Wang Zhihong and China? Experience verification from commercial industry [J]. Technical economy. 2007( 10)

[5] Shen Yifeng. The history of capital structure theory [M]. Beijing: Economic Science Press, 1999

[6] Don. Corporate capital structure theory? Review and prospect [J]. Managing the world. 2006 (5)

[7] Wang Juan, Yang Fenglin. An Empirical Study on the Financing Structure of Listed Companies [J]. Economic Theory and Management. 1998 (6)

[8] Wang Hanwen. Capital structure and operating performance? Investigation based on Zhejiang private enterprises [J]. Zhejiang Social Sciences .2008 (12)

[9] Yi Xianrong, Arjun huang. Frontier of modern financial theory [M]. Beijing: China Finance Press, 2005.

[10] Zou Ni. The relationship between profitability, growth, company size and capital structure of listed companies [J]. Enterprise Herald 20 10 (10)

Yu, Zheng The relationship between capital structure and performance of agricultural listed companies [J]. Finance and Finance.2010 (5)

Tietmann, Wessels. Determinants of capital structure selection [J]. Journal of Finance and Economics. 1988(4)

[13] Jodan J., Lowe J., Taylor P. Strategy and financial policy of British small enterprises [J]. Journal of Business Finance and Accounting. 1998(25)

Frank M.Z., V.K. Gauillard? Pecking order theory who tested Capi

-tal structure? [J]。 Journal of financial economics. 2003

Capital structure thesis II

On the Influence of Capital Structure on Audit Quality

In this paper, the controllable accrued profit in financial statements is selected to replace the audit quality, and the modified Jones model is used to calculate the controllable accrued profit, and the relationship between capital structure and audit quality is tested with the data of listed companies in China in 2006 as a sample. The results show that there is a significant statistical relationship between capital structure and controllable accrued profits.

Capital structure; Controllable accrued profit; Audit quality

introduce

In recent years, due to a large number of audit failure cases of listed companies, audit quality has become a hot issue of concern. As a proportional relationship between equity capital and debt capital, capital structure is a concentrated expression of the rights and obligations of relevant stakeholders in enterprises. It affects and determines the corporate governance structure, and then affects and determines the corporate governance efficiency. When financial crisis occurs in listed companies, their motivation for earnings management and manipulation is obviously enhanced. And can the statements audited by certified public accountants identify the corresponding profit manipulation?

At present, there is little information about the influence of capital structure on audit quality. This paper attempts to use specific data for quantitative verification and analysis. So as to further study the influence of capital structure of listed companies on audit quality, and put forward some suggestions to improve audit quality. The ultimate goal is to optimize the capital structure of enterprises, improve the quality of financial information disclosure of listed companies, reduce the financial risks of listed companies, and then improve the audit quality.

I. Literature review

Zhu Xiaoping and Yu Qian (2003) pointed out that the company's financial status and operating performance will affect the company's audit opinion from the perspective that the company's operating performance and financial status are not good and the management needs to whitewash the statements to manipulate profits. The test results show that the quick ratio, asset-liability ratio, the ratio of accounts receivable to total assets, and the number of years of listed companies are negatively related to the probability of the company being criticized by non-standard opinions, and are negatively related to the asset scale, the ratio of inventory to total assets, the return on net assets, and the cash flow ratio.

Zhang Weiguo and Wang Xia (2004) pointed out by studying the balance sheets of listed companies in China that the debt situation will have a direct impact on the company's information disclosure, and the financial scandal of Enron in the United States was largely caused by the company's high asset-liability ratio. Theoretically, the higher the company's leverage, the greater the financial risk it faces and the greater the possibility of being underestimated by the capital market; In order to eliminate the negative impact of excessive debt ratio on the stock market, company management often manipulates information disclosure, such as setting up a large number of shell subsidiaries that are not included in the consolidated statements to avoid it? Report? Financial risks, or the use of earnings management to increase corporate income, thus showing the positive effect of high asset-liability ratio. Previous studies show that the higher the company's asset-liability ratio, the more managers will manage earnings for job security, thus reducing the quality of information disclosure.

Wang Yurong and Huang Qiaohuan (2008) conducted an empirical study on the influencing factors of audit quality of listed companies in China, and obtained the asset-liability ratio, the types of audit opinions in the previous year and? Not standard? The probability of expressing opinions is positively correlated. This shows that certified public accountants will be more cautious when their customers have financial crisis, especially when listed companies have losses, which will cause widespread concern. Not standard? Opinions are more likely.

Second, the research design

(A) the hypothesis put forward

Judging from the actual situation in China, not all specific indicators are suitable for evaluating the audit quality of listed companies. Fang Junxiong and others studied the auditor's performance when the company made its first net loss. One of the conclusions is that there is no significant difference in the audit opinions issued by auditors of different sizes in China's current audit market, and it may not be suitable for China's current situation to use the auditor's size as an alternative standard of audit quality in mature foreign markets. 1996 Subramanyam made a comparative study of the international original? Six? Accounting firms and? Not six? Pricing of any accrued profits of accounting firms. The research shows that the audit quality is directly related to the information value of disposable accrued profits. At present, listed companies often manipulate controllable accrued profits, and there are widespread earnings management and management fraud, which will reduce the reliability and authenticity of accounting data and cause information distortion in financial reports. Auditors should express appropriate audit opinions to reveal the existence of earnings management and management fraud, so as to reduce audit risks, provide the reliability of accounting information and increase the usefulness of accounting information users. Therefore, this paper intends to use controllable accrued profit as the standard to measure audit quality.

Basic financial data and indicators, as indicators of the company's financial position and operating performance, not only reflect the company's basic capital structure, but also are the direct materials for certified public accountants to audit. This paper will put forward two hypotheses to test the influence of these factors on audit quality.

The proportion of liabilities in the capital structure affects the financial risk of the company. In order to verify whether the asset-liability ratio will affect the audit quality, we put forward the following assumptions.

Suppose 1: The company with higher asset-liability ratio? Whitewash? The stronger the motivation of consolidated statements and earnings management, the higher the controllable accrued profits and the lower the audit quality.

Because creditors have the function of supervising and ensuring that managers do not manipulate income and report misleading accounting value. With the improvement of debt financing level, the ownership interests of stakeholders (lenders) also increase, which leads to an increase in the demand for higher audit quality. To this end, the following assumptions are made.

Hypothesis 2: The higher the debt financing level, the lower the controllable accrued profit of the company and the higher the audit quality.

(b) Sample selection and data sources

This paper selects the samples of all listed companies in Shanghai and Shenzhen stock markets in 2006, excluding the financial and insurance industries and listed companies with incomplete data, and finally gets 133 1 research samples. The main data sources used in this paper are: CSMAR China listed company's annual financial report database, China stock market discretionary and non-discretionary accrued profit research database, China listed company's capital structure research database, etc.

(3) Definition and calculation method of variables

1. dependent variable

In this paper, the modified Jones model is used to calculate uncontrollable accrued profits:

NDAt/At- 1 = a 1/At- 1+a2(△REVt-△RECt)/At- 1+a3p pet/At- 1

Among them, NDAt is the non-discretionary accrued profit of t year, At- 1 is the total assets of t- 1 year, △REVt is the difference between t year's operating income and t- 1 year's operating income, △RECt is the difference between t period and t- 1 period's accounts receivable, and PPEt is t year.

TAt/At- 1 = a 1/At- 1+a2△REVt/At- 1+a3PPEt/At- 1+e

Where TAt is the total accrued profit, t is the year of the event period, and e is the residual value.

Deducting non-discretionary accrued profit from total profit can get discretionary accrued profit, and then ABS(DAt/At- 1) can be calculated to measure audit quality.

2. Explain variables

According to the above two assumptions, we set the following two explanatory variables (see table 1).

3. Control variables

There are many factors that affect audit quality. This paper mainly studies the factors related to capital structure. According to the relevant research experience and the unique background of China's capital structure, we mainly choose three indicators that may affect the audit quality as control variables (see Table 2).

Research mode

In order to verify the correlation between capital structure and audit quality, we designed the following multiple regression models:

ABS(DAt/At- 1)= A0+a 1 lev+a2LL+a3 size+a4 cash+a5QR+a6LQR

The purpose of this model is to reveal which factors have a more significant correlation with audit quality among the factors that affect the capital structure.

The statistical analysis software used in this paper is SPSS 12.0.

Third, the results and analysis

Descriptive statistical analysis

Using the descriptive statistical results of the variables in Table 3, we can get the following preliminary conclusions: the maximum value of (1)ABS(DAt/At- 1) is 4.959, which is 4.959 times of the total assets of the previous year, indicating that there is a large room for earnings management in listed companies; At the same time, the average absolute value of disposable accrued profits of about 24% also shows the possible widespread earnings management behavior of listed companies. (2) The asset-liability ratio of listed companies varies greatly. For example, the highest asset-liability ratio is as high as 970%, and the lowest is only 2. 1%. The average asset-liability ratio of listed companies in the sample is about 60%, which has great financial risks. (3) The average long-term debt ratio is about 9.62%, which shows that the debt level of listed companies in China is high at present, and the possibility of capital turnover difficulties of listed companies increases, which in turn increases the credit risk and liquidity risk of listed companies and poses a potential threat to the company's operation. (4) The average cash flow debt ratio in the sample is about 18.5%, indicating that the net cash flow of listed companies in China is insufficient, and companies need short-term liabilities to ensure normal operation. (5) The average flow rate is about 1.4 1, and the quick freezing rate is about 1.30. According to international practice, the current ratio of an enterprise is 2, and the quick ratio cannot be lower than L generally, otherwise the short-term solvency is insufficient. As can be seen from the above data, the liquidity ratio of listed companies in China is obviously low, and the short-term solvency of enterprises is low.

(B) the results of regression analysis

After regression, the F statistic is 10.857, which is significant at the level of 0.0 1, that is, ABS(DAt/At- 1) is significant with LEV, LL, SIZE, CASH, QR and LQR at the level of 0.0 1.

From the statistical results of multiple regression in Table 4, it can be seen that there is a significant correlation between the asset-liability ratio and ABS(DAt/At- 1), which shows that the asset-liability ratio will affect the discretionary accrued profits, and the higher the asset-liability ratio, the higher the discretionary accrued profits of listed companies, thus reducing the audit quality. The correlation between long-term debt ratio and ABS(DAt/At- 1) is not significant, which shows that the audit quality of listed companies with high long-term debt ratio is not necessarily lower than that of listed companies with low long-term debt ratio.

There is a significant positive correlation between asset size and ABS(DAt/At- 1), which shows that the larger the asset size, the better the benefit, the greater the motivation of earnings management, and the higher the controllable accrued profit, which will reduce the audit quality.

Four. conclusion

On the basis of analyzing the measurement method of audit quality, this paper chooses the controllable accrued profit estimated by the adjusted cross-sectional Jones model as a substitute variable of the audit quality of financial reports, analyzes the relationship between capital structure and audit quality by studying six variables related to capital structure, and draws the conclusion that there is a certain correlation between capital structure and audit quality through theoretical analysis and investigation statistics. The limitation of this paper is that due to the limitation of space and time, the influence of audit quality measurement methods other than disposable accrued profits on the audit quality research of financial reports is not fully considered.

refer to

[1] Fang Junxiong, HongCambridge, Li Ruoshan. Research on the Influencing Factors of Audit Quality of Listed Companies in China: Discovery and Enlightenment [J]. Audit Research, 2004, (6):35.

[2] Wang Yurong, Huang Qiaohuan. An Empirical Analysis of the Factors Affecting the Audit Quality of Listed Companies in China [J]. Journal of South China Agricultural University (Social Science Edition), 2008, (2):62-64.

[3] Minglai Lai and Wu Chunyan. Measurement of Audit Quality and Analysis of Its Influencing Factors [J]. Accounting Monthly, 2005, (5):35-36.

[4] Yi Cong. Can audit opinion types reflect audit quality? [J]。 China Audit, 2002, (4):75.

[5] Zhang Weiguo and Wang Xia. Analysis on the causes of accounting errors of listed companies in China [J]. Accounting Research, 2004,4.

[6] Heidi van der Bowie, Marlene Willekens, Ann Geremink. Audit company size, public ownership and company? Discretionary accrual project management [J]. International Journal of Accounting, 2003, (38): 1-22.

[7] Li Jinhua. Is audit quality more important for companies with high investment opportunities? [J]。 Accounting Public Policy, 2009, (28):33-50.

[8] Is the audit quality of Kam-Wahlai, Ferdinand A. Gul. Laventhol and Horwath poor? [J]。 Journal of Accounting and Public Policy, 2008, (27):2 17-237.

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