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An Empirical Study on Capital Structure and Corporate Performance of Chinese Listed Companies

Journal of Commerce and Accounting Research

Volume 5 Issue 3

Published: 2016
Author(s) Name: Fahd Al-Duais | Author(s) Affiliation: Department of accounting, Southwestern University of Finance and Economics, Sichuan, Chengdu, China
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Abstract

The relationship between level of debt and the companys performance remains an important unsolved issue in the field of financing. It is very important to know how Chinas listed companies manage their capital towards business growth. This paper investigates the impact of the capital structure on corporate performance of a sample of 711 listed companies on the Shenzhen Stock Exchange in China in 2014. The results indicates that there is a positive relation between financial leverage and corporate performance as well as there is a positive impact that the mixture of long-term debt and short-term debt (using total debt). This would help decision maker in the companies to finance firms operation in the both periods. On the other hand, the short term debt has a negative relation and impact on corporate performance compared to the changing in firm size which cannot change in the profitability of firms.

Keywords: Capital Structure, Financial Leverage, Corporate Profitability, Chinese Companies

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