Introduction:. Capital Structure Plays A Significant Role

1685 WordsMar 17, 20177 Pages
Introduction: Capital structure plays a significant role in a firm and it is one of the determinations to have a far-reaching impact on operations of firms and further development in future. Capital structure can be defined as a mix of debt and equity (Abor, 2005) and its study can be used to explain finance business activities by corporations to finance real investment (Myers, 2001). Despite that a lot of western scholars attempted empirical studies on testing the optimal capital structure, the results are always different because of the complexity and particularity of applied economics and national economics. As far as now, there is no a specific answer to prove its relationship between capital structure and firm’s profitability. Some…show more content…
The reason why I pick this is to explore potentials in China because of the imperfect market mechanism, the immature development of capital market and the lack of governance mechanism, constraints of debt financing and protection law for investors. Thus, it is very vital to research the relationship between capital structure and profitability based on Chinese listed firms. Agriculture, electronic industry and real estate are focused recently but manufacturing industry ignored. The number of listed firms in manufacturing industry occupied a large percentage of the total, and Manufacturing industry is in the transformation of the mode of development at present stages, its objective has strong representative significance. Not only does this research enrich the field of research and provide theory instruction for Chinese listed firms, but also improving the financing environment and the efficiency of capital market for governments. Literature review: Methodology: This study would apply both of quantitative and qualitative method to test the relationship between capital structure and profitability. I set up the range is manufacturing companies in U.S as it has the most manufacturing companies in top 500, it is easier for me to find information and collect data. All samples I have chosen can be found in NYSE over the period of 5 years (2011-2015). I picked 40 listed firms as my samples including Apple,
Open Document