Research on Capital Structure of Chinese Listed Companies in Post-Economic Crisis
|School||Zhejiang University of Finance|
|Keywords||Post Economic Crisis Period Macroeconomic Factors Listed Companies Capital Structure Optimization|
In 2008, a serious financial crisis lightning-fast spread to the whole world. Although Chinese economy is stably developing in a high pace, the financial crisis still has had a negative effect on Chinese macro economy development. The national government implemented an active fiscal policy and an accommodative monetary policy. By doing this, Chinese economic situation recovered from the crisis quickly, but excess release of liquidity and inflation caused by high prices pushed China’s economy into another“mire”. Therefore, it is still too early to affirm that China has been already through the crisis. Chinese economy development could be facing more uncertain factors and more challenges.During last four years, China Economy experienced the period of overheating, recession, rebound and downside. Macro economy is repeatedly experiencing recovery, upsurge, recession to depression, all the enterprises will inevitably suffer the effect of macro economic fluctuation. Regarding the capital structure as the intermediary to influence enterprises, this paper will study if macro economic factors (including GDP growth rate, inflation rate, real loan interest rate, money supply and development of capital market) have an effect on capital structure of Chinese listed companies through selected business cycles between 2007 and 2010, related theories and empirical research. Based on the background of post-crisis period, uncertainty and complexity of development of macro economy will be analyzed in detail. As a consequent, enterprises will realize the macro-economic situation has concrete implications on companies’capital structure optimization in the post-crisis period. Besides, the paper will give viable solutions and suggestions on capital structure optimization for Chinese listed companies.The main conclusions and contributions of the dissertation are as follows:Firstly, the conclusions drawn from the theoretical and empirical analysis presented in this paper are: there is significant impact of macroeconomic factors (GDP growth rate, the rate of inflation, real lending rate, money supply, and the development of capital market) on capital structure of China’s listed companies; the debt/asset ratio of listed companies and GDP growth rate, the rate of inflation, one-year real lending rate, money supply, and the development of stock market show a positive correlation.Secondly, concluded the specific impact of the macroeconomic conditions on the listed companies capital structure optimization in the post-crisis era. In the post-crisis era, inflation caused by excess liquidity and high prices brings enterprises high production costs and labor costs, eroding profits; the appreciating renminbi undermines exports price advantage, intensifying international trade friction and reducing export earnings, both of which indirectly increase the difficulty in enterprise capital structure optimization from affecting the enterprise’s profitability, and increase business risk, not conducive to enterprises’ internal financing. The reduction of total social financing, the repeated rise of deposit/reserve ratio, the decline of renminbi loan increment and the year-on-year growth rate of broad money M2 in recent months, at the time of achieving initial success of bringing down the inflation the nation tightens monetary to control capital stock from the source, which increases enterprise’s difficulty in access to capital and capital costs, the confusing economic situation and the pressure to raise interest rates inhibit the enthusiasm of equity financing, making the enterprise financing blocked.Thirdly, by combining China’s economic realities and many classic cases of listed company this study proposed targeted measures of listed companies capital structure optimization, guiding the enterprises to actively use the macroeconomic conditions and the convenience of policy to achieve the purpose of optimizing the capital structure. China’s listed companies capital structure optimization may seize the corporate bond approval“convenient ways”; greatly develop corporate bond financing; hold new opportunity for mortgage brought by new "property law", increase long-term debt, reduce current liabilities; grasp the opportunity of restructuring brought by financial crisis, take industrial upgrading and transforming the mode of economic growth as guidelines on capital structure optimization, cultivate the consciousness of capital operation, can look for cheap potential resources, merge and reconstruct abroad, realizing the development by leaps and bounds; Enterprise may take the development path of the combination of industrial and financial capital under the control of risk; Enterprises hit by the crisis heavily can implement the contraction-type strategy in a planned way, divest less competitive or losing business units, product variety or market area, take funds back; transforming from diversification strategy to specialization and refocusing strategy, concentrate on core business, preserve power, and pass through the crisis.