Empirical Evidence From Chinese Listed: An Analysis of The Factors Affecting Debt Financing Structure
Empirical Evidence From Chinese Listed: An Analysis of The Factors Affecting Debt Financing Structure
Empirical Evidence From Chinese Listed: An Analysis of The Factors Affecting Debt Financing Structure
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debt maturity is negative correlation with the exclude the B shares, H shares and other
growth opportunities. With sources of debt foreign tradable shares of listed companies and
financing, the upstream and downstream left listed companies only issued A shares in
enterprises have more information about the order to maintain data consistency; taking into
business growth opportunities, relatively account the extreme values of the data adverse
speaking, banks are outsiders, and have effects on the study, we excluded ST companies;
less information about growth opportunities for In view of the differences between
business relatively, so the enterprises with more financial companies and the general operations
growth opportunities gain the trade credit much of listed companies, this article excludes
more easily. financial companies in order to maintain the
Therefore, we propose hypothesis as follows: comparability of data. According to the above
Hypothesis 3 In the same circumstances, the criteria for initial screening of the sample, the
company with the more growth opportunity has a remaining 1,022 listed companies were selected
higher proportion short-term liabilities, and as sample.
higher proportion trade credit in debt financing. 3.2. Variable Definition
The agency cost theory of free cash flow
( Jensen, 1986) considers that the free cash flow we select the relevant variables to test our
to reduce debt agency costs. The debt contract hypotheses, definitions and calculations of
reduce the amount of free cash flow controlled variables are shown in Table 1.
by managers thus it ensure that managers target
actions are consistent with the shareholders, Table 1 Variable Definitions
thereby reduce agency costs. When the short- variable name Mark The formula
term debt financing contract governance effect is The proportion Slr Current liabilities / total
mainly reflected in the company's liquidation of short-term liabilities
and constraints arbitrary decision rights of the debt financing
The proportion Blr (Short-term loans + long-
managers on the free cash flow, and long-term of bank loans term loans) / Total
debt financing covenants governance effect is liabilities
mainly displayed to prevent managers inefficient Proportion of Clr Accounts Receivable /
expansion (Hart and Moore), so when the commercial Total liabilities
enterprise have a lot of free cash flows, managers credit
will be more easily to do excessive investment Tobin's Q TBQ Market value / replacement
and seeking private interests. So companies may value
reduce free cash flow by short-term debt Main business Grr (Current main business
financing to better motivate managers to revenue income - the main business
growth income the previous
prevent managers excessive investment by using
period) / previous period
company cash flows and access to personal income from principal
interests, And corporate debt maturity structure operations
is negative correlation with its own cash flow. Total Assets Size Natural logarithm of total
Therefore, we propose hypothesis as follows: assets
Hypothesis 4 In the same circumstances, Earnings Per EPS Net profit / number of
companies with high free cash flow has a high Share ordinary shares
proportion of long-term debt, and short-term Free cash flow FCF Net free cash flow
debt ratio is low. Current Ratio Lr Current Liabilities / Current
assets
Fixed assets Far Fixed Assets / Total Assets
3. Sample Selection and Variable Definitions ratio
Asset-liability LEV Total Liabilities / Total
3.1. Sample Selection ratio Assets
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dependent variables, the previous theoretical 4. Empirical Results and Analysis
analysis and assumptions shows that corporate
debt financing structure may be influenced by Using the above data, we use OLS regression to
the company's free cash flow, the company's regress the model (1), data processing by
growth opportunities, the company's level of stata11.0 EXCEL statistical software, results are
profitability, the company's solvency, and presented in Table 3.
company size and other factors, therefore, this
study intends to adopt the model (1) regression. Table 3 Multivariate Regression Analysis: Debt
Financing Structure and Affecting Factors
y 1 FCF 2Gff 3TBQ (1) (2) (3)
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more and more long-term debt. In the sources of structure and source type of debt financing in
financing, the more long-term assets, the higher empirical analysis. we found that company size,
the proportion of bank loans in debt financing. so Tobin's Q, fixed asset ratios and free cash
the hypothesis 2 is verified. flow have impact on the company's debt
From Table 4-1, we can see the variable TBQ financing terms and financing structure. the
are significantly positively correlated with the study found, the bigger size companies have the
proportion of short-term debt and. it shows higher proportion of long-term debt, and less use
that companies are more willing to adopt short- of bank borrowings in debt
term debt financing with good growth financing; companies with good growth
opportunities. In the sources of debt financing, opportunities have the higher the proportion of
the variable TBQ are significantly negative short-term debt, and less use bank loans in debt
correlation with the ratio of bank loans, financing; the companies with high proportion of
indicating the proportion of bank loans are low fixed assets have the more long-term debt
in good growth opportunities company. the financing, and the higher proportion of bank
variable TBQ were positively correlated with the loans in debt financing; Companies with high
commercial credit ratio, but not significant, free cash flow have a high proportion of short-
indicating good growth opportunities companies term liabilities, and the lower the proportion of
are willing to use the other ways of debt bank loans. This paper provided evidence
financing, including commercial credit, but it support for the financing theory research, and the
will lower by bank loans. Thus, it can be seen the basis for corporate to arrange the debt covenants
hypothesis 3 is verified. and select financing structure reasonably.
Regression results in Table 4-1 shows that the
business cash flow cff are positively correlated 6. Acknowledgement
with the proportion of short-term loans, but not
significant, and they are significant negative This research was financially supported by the
correlated with the proportion of bank loans at National Social Science Youth Foundation of
the 10% level. they are positively correlated with China (Grant NO. 13CGL050), the Humanities
the proportion of commercial credit, but not & Social Science youth Foundation of Ministry
significantly. It shows that companies with high of Education of China (Grant NO. 11YJC630243,
free cash flow are willing to use more short-term 12YJC630010, 13YJC630027).
loans, and easier to use commercial credit and
other debt financing, so the hypothesis 4 is 7. References
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