Abstract
By using the panel data of quoted company during 2005-2014 and the PVAR model, this paper aims to empirically examine the dynamic and interacting relationships among Debt, Growth of company, PB of company’s stock, the Effective income tax rate. The pvar model can estimate the dynamic relationship of all endogenous variables, and the empirical results show that the Growth, PB and ETR are the critical factors of Debt; The PB’s ability to explain changes in the capital structure has grown stronger over time, and “invalid periods” may occur in the short term. Enterprise Growth and Effective income tax rates both have positive effects in the short term. At the early stage, the enterprises show the debt financing preferences. With the expansion of the scale, the enterprises slowly show the equity financing preferences.
Highlights
With the development of China’s financial securities market, especially the establishment of small and medium-sized boards and the GEM, more small and medium-sized companies have entered the capital market
The pvar model can estimate the dynamic relationship of all endogenous variables, and the empirical results show that the Growth, PB and ETR are the critical factors of Debt; The PB’s ability to explain changes in the capital structure has grown stronger over time, and “invalid periods” may occur in the short term
The results show that the impact of the P/B ratio, corporate growth rate and effective income tax rate on the capital structure of the enterprise is volatility
Summary
With the development of China’s financial securities market, especially the establishment of small and medium-sized boards and the GEM, more small and medium-sized companies have entered the capital market. It is very necessary to analyze the debt financing structure of Chinese enterprises at this time. Debt financing is a corporate financial structure and performance of a very important aspect, MM theory, trade-off theory, agency theory and the pecking order theory is debt leverage of debt financing in different areas, tax shield benefit aspects, corporate finance costs of research
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