Study on the Factors of the Capital Structure of Coal Listing Corporation

Transcription

1 Study on the Factors of the Capital Structure of Coal Listing Corporation Yafeng Li *, Chunmei Cheng, Qiang Liu School of Economics, Liaoning University of Technology, Liaoning Abstract: Factors affecting capital structure of coal listing corporation is Analysised, according to the Related theory of capital structure. With financial data of China A-share Coal listing companies in , using the method of multiple regression, empirical analysis is made to analyze the factors that affect capital structure of coal listing corporation. Research shows that the capital structure of China Coal listing Corporation has positive correlation with the profitability, growth, debt paying ability, operating ability and the value of asset security, and has negative correlation with the non debt tax shield. The Research model reflects the characteristics of the capital structure of Chinese coal listing Corporation, and provides a reference for optimizing the capital structure. Keywords: Coal listing corporation; capital structure; Influence factors 1. Introduction Capital structure includes the constitution of various capital of enterprises and the their proportion[1]. Decision of capital structure is the core problem of corporate finance. At present, There are some problems in Chinese coal listing corporation[2,3]. The debt ratio is lower. More coal listing corporations focus on equity financing and short-term debt financing.the ownership concentration is higher[4].so the study about capital structure of coal listing corporations is very necessary. The analysis of the main factors that affect the capital structure is of great realistic significance to optimize the capital structure of coal listing corporation. 2. Study Design 2.1 The study sample and data sources Coal listing companies that listed before 2011 in the A shares market were selected as a research sample.remove the relevant data is incomplete and ST companies a total of 28 companies. Financial data sample interval is All raw data are derived from the stock exchange published on the website of each company's annual report information. 2.2 Variable selection Some opinion from domestic and foreign scholars was referenced, when the Variable was selectied[5,6],and Characteristics of coal listing Corporation were considered. Finally, seven factors wa selected as independent variables.,including profitability, growth, operational capacity, short-term solvency, non-debt tax shield, value of 2.3 Hypothesis (1) Profitability According to pecking order financing theory,when the listing companies finance,the mode of endogenous financing is used firstly,and followed by external financing. So when the listing company has strong profitability,it will use more financial surpluses and reduce debt. Hypothesis 1: There is a negative relationship between profitability and capital structure. (2) Growth According to the trade-off theory, the listing companies may produce agency costs and bankruptcy costs.but in different life cycle,listing companies face different agency costs and bankruptcy costs. Listeing companies in terms of a strong growth, will face a variety of investment opportunities,and have broader prospects of development.because of the huge potential of rdevelopment, the listing company requires a lot of capital as a support and protection.so asset liability ratio the listing corporation that Belongs to growth type is higher. Hypothesis 2: There is a positive relationship between growth and capital structure. (3) Operating capacity Throughout the entire process of production and operation, operating capacity is a decisive role. It is mainly used to measure the efficiency of different funds. Enterprises operating capacity, the stronger, the higher the liquidity, the solvency of the stronger, the better the financial situation of enterprises, companies will get more funds for business development. Hypothesis 3: There is a positive relationship between the operational capacity and capital structure (4) The solvency The ability to measure the of an enterprise is the guarantee of the long and short term debt to be repaid as scheduled.the solvency reflects cash payments, debt repayment capacity. Strong solvency indicates that the companies have sufficient funds to repay debt. Hypothesis 4: There is a positive relationship between solvency and capital structure. Variable name Profitability Growth Operating capacity Table 1 Argument Definition Table Index Name Variable symbol Variable definitions Sales margin X1 Profit after tax / Net sales revenue Roe X2 Profit after tax / Average Equity Total profitability X3 The total profit / Average total Net X4 The amount of net profit growth this year / The total net profit last year Total X5 This year the total amount of asset growth / Total last year Total X6 Operating income / Average total Inventory X7 Operating cost / The average balance of inventories Accounts X8 Operating income / The average balance of accounts Journal of Residuals Science & Technology, Vol. 13, No. 7,

2 receivable Short-term solvency Current X9 Current / Current liabilities Interest X10 EBIT / Interest expense Ownership Structure The X11 The first shareholder the number of shares / Total shares NDTS Depreciation X12 Depreciation / Total Tangible X13 (Stock + Fixed )/ Total (5) Ownership structure The level of ownership concentration determines the direct decision-making power of the enterprise in which the shareholders of the company. Major shareholders from the perspective of safeguarding their own interests, tend to use equity financing debt less stressful way. Hypothesis 5: Between Ownership Structure and Capital Structure negative relationship exists. (6) Non debt tax shield(ndts) Non debt tax shield is defined by the income deduction makes the cost of corporate tax payments become less, such as depreciation of fixed, loss of checkout, investment tax incentives. The Reason that causes NDTS is not debt, But NDTS still plays a role in pre-tax income deductible. Because of the increase in non-debt program, enterprises is Exempt from tax and reduce interest expense. Hypothesis 6: Non debt tax shield and capital structure have negative relationship. (7) Value of asset guarantee The impact of the value of on the capital structure is mainly reflected in the agency costs.tangible available for collateral, the higher the value, the lower the agency cost creditors. Asset-backed enterprise value of tangible, the more strong corporate credit, this would be relatively easy to debt financing, financing costs will be reduced. Hypothesis 7: Between the value of asset guarantee and capital structure there is a positive relationship. 3. Empirical Analysis 3.1 Regression model construction Multiple regression analysis is a statistical method for the establishment of a number of different variables among linear or nonlinear mathematical model of the number of relationships. Analysis of the linear correlation between the capital structure and the influence factors of coal listing corporation by constructing multiple linear regression equation, The liability ratio is interpreted as a variable, and the flow rate and other 13 indicators are used as explanatory variables. Regression models were established as formulas (1). Y=β 0+β 1 X 1+β 2 X 2+ +β 12 X 12+ε (1) In formula (1), Y is the dependent variable; β 0 is constant term; β i is the partial regression coefficient, representing the degree of influence on the explanatory variables are explanatory variables; ε is a random variable. 3.2 Correlation analysis Analysis about 13 factors affecting the capital structure of the coal listing corporation is carried out,using Pearson simple regression. In order to study whether there is a linear relationship between different factors. Correlation analysis results show that the total growth rate, current ratio, the proportion of the first shareholder, the non debt tax shield, the sales net interest rate and the asset liability ratio have a significant linear relationship. The other 8 variables are not significantly related to the linear relationship between the ratio of and liabilities. 3.3 Multiple linear regression analysis Explanatory variable screening strategy is adopting the policy of forced entry into the regression equation.detecting the multicollinearity between the variables is carried out. The results shown in Table 2. Table 2 Results of multiple linear regression analysis of asset liability ratiomodel Summary (b) Model R R Square Adjusted R Square Std. Error of the Estimate 1.906(a) b Dependent Variable: Asset liability ratio Goodness of fit test of regression equation is carried out according to Table 2. Since the equation has multiple explanatory variables, the coefficient of determination may be affected by the number of explanatory variables, therefore he goodness of fit is tested with adjustment the coefficient of determination R².The adjustment coefficient of determination R²is equal to 0.656, so goodness of fit of the regression model is relatively high.interpretation between variables and explanatory variables significantly correlated. Table 3 Results of multiple linear regression analysis of asset liability ratioanova(b) Model Sum of Squares df Mean Square F Sig. 1 Regression (a) Residual Journal of Residuals Science & Technology, Vol. 13, No. 7,

3 b Dependent Variable: Asset liability ratio According table 3, The probability p value (0.003) is much less than the significance level α (0.05), It shows that the linear relationship between the independent variable and the dependent variable was significant.and the regression model can be established accordingly. According to Table 4, regression coefficients significance test and multicollinearity test are carried out. Most variables regression coefficient t significant probability p value of the test is greater than the significance level of 0.05, so that the linear relationship between the individual variables and the dependent variable is not significant and should not be retained in the equation. Meanwhile, according to the tolerance and variance inflation factor, the total turnover, inventory turnover rate, and accounts receivable turnover rate and other explanatory variables of the multiple linear is serious. Excluding these variables may be considerd when re-modeling. The independent variable will be removed and the regression equation is re established. When appropriate explanatory variables are selected, the backward elimination strategy in SPSS software is adopted.the analysis results are shown in Table 5, Table 6. According to table 5, The establishment of regression equation is obtained by eight steps. The final equation is the eighth model.since the regression equation significance test of probability p is 0, less than the significance level α, therefore the eighth equation is reasonable and can be set up linear regression model. Table 4 Results of multiple linear regression analysis of asset liability ratio (forced entry strategy Coefficient (a) Standardized Unstandardized Collinearity Statistics Model t Sig. B Std. Error Beta Tolerance VIF 1 (Constant) Roe Total Assets Net Profit Margin Sales margin Net profit growth Total asset growth Total asset turnover Inventory turnover Accounts receivable turnover ratio Current Ratio Interest payments multiples The proportion of the shareholders NDTS a Dependent Variable: Asset liability ratio Table 5 Results of multiple linear regression analysis of asset liability ratio (backward filtering policy)anova(i) Model Sum of Squares df Mean Square F Sig. Regression (a) 1 Residual Regression (b) 2 Residual Regression (c) 3 Residual Regression (d) 4 Residual Regression (e) Journal of Residuals Science & Technology, Vol. 13, No. 7,

4 6 Residual Regression (f) Residual Regression (g) 7 Residual Regression (h) 8 Residual i Dependent Variable: Asset liability ratio Table 6 Asset-liability ratio of multiple linear regression analysis (backward filtering policy) Coefficient (a) Table 4.6 Model Unstandardized Standardized t Sig. Collinearity Statistics B Std. Error Beta Tolerance VIF 8 (Constant) Roe Total asset growth Accounts receivable turnover ratio Interest payments multiples NDTS a Dependent Variable: Asset-liability ratio According to Table 6, Probability p value of regression coefficient significance test is less than the significance level of 0.05, so the net return on, the growth rate of total, accounts receivable turnover ratio, interest payments ratio, non-debt tax shield and the value of asset- backed are linear relationship between the explanatory variables and significantly.it is reasonable that these variables are retained in the model.at the same time, the tolerance of each explanatory variable in the table 6 are close to 1, the variance inflation factor are between 1-2, indicating the remaining 6 collinearity between explanatory variables is weak, and final model is reasonable. The regression equation can be obtained as Formula (2). Y= X X X X X X 13 (2) 4. Conclusion According to the empirical research result, the regression coefficient ROE is 0.174, t is 2.151, and the corresponding probability P is less than 0.05, and it has practical statistical significancethe.it shows that net Rate of Return on Common Stockholders Equity and asset liability ratio are positively related. The higher Return on Common Stockholders Equity, the higher asset-liability ratio.similar analysis of other variables can also be carried out. The total growth rate, accounts receivable turnover rate, interest payment multiple, and asset collateral value are positively related to asset liability ratio,and only the non debt tax shield is negatively related to the asset liability ratio. (1) Corporation profitability and capital structure is positively related. The empirical result shows that the test results ROE is positive, indicating profitability and capital structure are positively correlated. This is contrary to previous assumptions. According to Trade-off theory[7], the better the profitability, the better the business.operational risk and financial risk is low. It will enhance the company's creditthe company's operating risk.high debt ratio can not be the company's operating pressure.companies can achieve a reasonable tax avoidance through a higher debt ratioow financial risk, the company's credit rating is high, high debt ratio.therefore, profitability and capital structure are positively related (2)Growth and capital structure are positively related. The empirical results shows that the test results of total growth rate are positive, indicating growth and capital structure are positively related, which is consistent with previous assumptions. The better growth of the enterprise, the greater the potential for development[8].growth type enterprise production and management activities need a lot of money.because when the listing companies finance,there are many limitations. financing efficiency is low.because debt financing can quickly solve the problem of capital supply, more enterprises choose to use,so asset-liability ratio will be increased. (3) Tperating capacity and coal capital structure are positively correlated. The empirical result shows that accounts receivable turnover ratio and debt ratio is proportional, consistent with the previous hypothesis. Operational capacity can reflect the effect of the use of funds of enterprises. The stronger operating capacity, the better using of corporate funds, the higher the corporate credit rating. Investors are more willing to invest in the the company that operating capacity is strong. So the company will get more debt financing. (4) Solvency and capital structure are positively related The empirical results show that a multiple of interest payments on the test results is positive, indicating the existence of a positive correlation between solvency and capital structure. However, the regression coefficient is very small, only 0.001, indicating Solvency has little effect on the capital structure of the coal enterprise. Strong solvency can make the company get debt financing, with a good reputation for debt. Journal of Residuals Science & Technology, Vol. 13, No. 7,

5 (5) The non debt tax shield is negatively related to capital structure. In test results,ndts is negative, indicating that non-debt tax shield and capital structure are negatively correlated, consistent with the experimental hypothesis. NDTS liabilities can offset corporation tax by using depreciation and other non-factors[9].it achieves a reasonable tax avoidance purposes. In general, the more non-tax debt, the less debt financing. Enterprises will also adopt optimal financing decisionmaking way to achieve the purpose of reasonable capital structure. (6) The value of asset security is positively related to capital structure. The empirical results show that test result of asset-backed is positive, indicating it is positively related to capital structure, consistent with the experimental hypothesis. According to the agency cost theory[10], thr more secured,the less risk of debt financing agency costs Banks will be more willing to provide loans, so corporate debt financing will be higher. (7) Effect of Ownership Structure on Listed Companies' Capital Structure of coal The selected variables representing the ownership structure index were removed by multiple regression equation, so the relationship between ownership structure and capital structure in the empirical findings was not reflected. It may be due to the limitations of the selection of explanatory variables. Conflict of interest The author confirms that this article content has no conflict of interest. Acknowledgements This research is funded by doctor research project of Liaoning university of technology (X201407), humanity and social science research project of department of education of Liaoning province(w ), public research personnel training project of department of science of Liaoning province ( ).social science plan fund project of Liaoning province (L15CJL001). References [1] Cheng Haitao. Theory research and Fnlightenment of capital structure, accounting communications,vol.24,pp ,2012. [2] Jing Min. study on Capital Structure Optimization Coal Listeing Companies - A Case Study of Xishan Coal and Electricity,Shanxi University of Finance and Economics,pp [3] Qiaoxiao Jing. Study on Characteristics and influence factors of capital structure in coal listing companies,shanxi University of Finance and Economics,pp. 9-13,2014. [4] Hong Xixi, Shen Yifeng. Empirical analysis about the influence factors of the capital structure of the listing Corporation in China, Xiamen University, pp , [5] Xiao Zuoping. The impact of ownership structure on capital structure choice - Empirical evidence from Chinese Listing Companies,Modern Economic Science,vol1, pp. 1-7,2014. [6] Zhao Xuanmin, Yin Xiaojiao. Analysis on the factors affecting the capital structure of the listing Corporation, accounting communications, vol.9,pp ,2013. [7] Fang Hu,Sidney Leung,Top management turnover, firm performance and government control: Evidence from China's listed stateowned enterprises. The International Journal of Accounting,vol.47,pp ,2012. [8] Dong Wenfu, Yin Xunting. Empirical analysis of the influence factors of the capital structure of the listing Corporation. Era Finance,vol.17,pp ,2013. [9]Hamed A,Javad A, Elham H,A, Comprehensive Review on Capital Structure heories,.school of Doctoral Studies (European Union) Journal, vol.45,pp.35-45,2012 [10]Zhu Yumei. Research on the capital structure of the listing Corporation in China,financial circles (Academic Edition),vol.16,pp.94-96,2013. Journal of Residuals Science & Technology, Vol. 13, No. 7,