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On the company's capital structure and corporate governance

Author: DuHaiYan From: www.yourpaper.net Posted: 2009-09-30 22:43:58 Read:
Abstract: State-owned enterprise reform is a complex system engineering, the reform of state-owned enterprises, the core problem is the problem of the company's governance structure. Learn information on economic theory, principal-agent theory, transaction cost theory, property rights theory, the modern theory of microeconomics analytical methods and technology designed by the company's capital structure and corporate governance effect, in order to reveal the capital structure in corporate governance decisive role.
Keywords: capital structure; corporate governance; governance effect

A company's capital structure, meaning and essence

The capital structure that the contract requires the right structure ", the subject of the contract is the company's stakeholders, the various stakeholders in accordance with its investment in dedicated assets owned
The residual claim and control rights; through the exercise of the right to form a governance mechanism, thus affecting the value or company performance. In order to achieve the maximization of enterprise value, then the contract requires the right structure "driven governance mechanisms" that capital structure must be asked is optimal. However, the formation of the capital structure, not unilaterally depends on the choice of the enterprise, but is closely related with the property rights system, financing system, operators reward incentive system and capital market institutions and other institutional arrangements.
The meaning of the company's capital structure
In the era of the knowledge economy and the modern market economy, corporate capital structure, in addition to the proportional relationship between equity capital and debt capital, should also include: the ratio between equity capital structure that is part of the equity capital, such as internal shares with external shares proportional to the ratio between ordinary shares and preference shares. Debt capital structure, the ratio between debt capital, such as the ratio between long-term debt capital and short-term debt capital, bank borrowings and corporate bonds ratio between financial debt and commercial debt proportional relationship. Non-financial non-financial capital, in addition to equity capital and debt capital, as well as operators and general workers to enterprises invested in human capital, suppliers and customers to businesses to invest in market capital, government capital to businesses to invest in the public environment capital. These non-financial capital should also become an important part of the corporate capital structure. Therefore, the corporate capital structure also includes a proportion of the relationship between financial capital and non-financial capital.
The nature of the company's capital structure
Corporate capital structure is an essential attribute of "contract requires the right structure. For businesses to invest in capital (including financial capital and non-financial capital) stakeholders have different requirements for the right to business ownership (to including residual claim and control over) allocation, which is reflected in the variety of contractual relationships. Example, by virtue of its businesses to invest in equity capital, the shareholders get the remaining requirements of the enterprise, that is, to obtain dividends, as well as to participate in the allocation of corporate control over arrangement by the shareholders' meeting, the Board of Supervisors, equity contracts, stock market system; creditors obtained by virtue of its investment in the debt capital shares residual (ie fixed interest) the right to participate in the allocation of corporate control over the institutional arrangements through debt contracts, bankruptcy mechanism; workers by virtue of its investment in human capital to labor wage demands from the right, at the same time by the staff director system and Supervisors, staff sharing system, labor contracts, talent market institutional arrangements involved in the control of the allocation; government by virtue of its investment in public environmental capital, has the right to tax requirements corporate behavior, at the same time through the regulations, policies, markets and other institutional arrangements to be constrained and influence; exclusive contractual relationship customers and suppliers with businesses to invest in market capitalization, in addition to the property transaction, from the enterprise and services, but also by the system of trading contracts, product market arrangements to be constraints and the impact on corporate behavior. Second, the company's capital structure corporate governance structure

A theoretical analysis of the effect of shareholding structure of governance
(1) the meaning of the shareholding structure. The ownership structure is an important part of the company's capital structure, the meaning of the shareholding structure should grasp the following aspects: First, the proportion of various types of shares held by shareholders of the company's total shares, equity distribution degree. In general, the stake of the largest shareholder in more than 50%, it indicates that a high concentration of equity; indicates that between 20% -50% equity interest in the relative concentration or relatively dispersed; below 20%, that equity is highly fragmented. The higher the degree of concentration of ownership, equity interest in the stability of the stronger. Second, the Company's shares by which shareholders held, the shareholders characteristics. The relationship between the shareholders and the company can be divided into a company insider shareholders and external public shareholders; identified shareholders and identity is not clear whether their identity clear, can be divided into shareholders; their stability, can be divided into long-term nature shareholders and shareholders temporary. The attitude and the ability of the different characteristics of the shareholders on corporate governance is different.
(2) shareholders characteristics of the corporate governance structure. Whether the identity of the shareholders, can be divided into identifiable shareholders and identity is not clear to shareholders. The former includes the individual shareholders and corporate shareholders. The attitude and the ability of the different characteristics of the shareholders on corporate governance is different.
With the increasing number of the continuous expansion of business scale and the number of shareholders, many dispersed individual shareholders cheap because of their voting rights and influence is extremely limited and greatly weakened the company's level of interest in and capacity to govern, which would take the "free-rider" behavior to reduce the cost of its governance. Numerous scattered individual shareholders of the company who acts mainly through the stock market, to take the way of "voting with their feet". So many scattered individual shareholders as a return but has no control over the affairs of the company capital loans.
(3) the impact of the equity distribution degree of corporate governance structure. Stake of the largest shareholder as a standard to measure the degree of equity distribution to the equity distribution was divided into three types: equity highly concentrated (the largest shareholder stake in more than 50%), highly fragmented equity type (the proportion is less than 20%), equity relative concentration of relatively decentralized (the ratio is between 20% -50%). The different types of equity distribution to take over the market, the degree of the company's business incentives, external corporate governance mechanism of the proxy contest and oversight mechanisms all have varying degrees of impact.
2 The theoretical analysis of the effect of comprehensive management of the capital structure
(1) According to the contract theory of capital structure, the company's capital structure, corporate governance structure of the combined effects of the concentrated expression affect the level of the efforts of operators in the company's capital structure and behavior choices. Operators efforts of low-level, non-commercial consumption, overinvestment and underinvestment in equity financing, can be suppressed by an appropriate increase in the ratio of operating stake and liabilities financing; the liabilities financing in shareholders and operating there dividend policy operations, dilution of the value of claims, liabilities excessive and insufficient investment in moral hazard behavior, through the issuance of convertible bonds, stock preferential subscription rights of corporate bonds, the redemption of corporate bonds as well as select reasonable asset substitution behavior The term of the bonds and other measures to keep them under control. In short, it is reasonable to arrange the company's capital structure helps inhibit the operators of moral hazard and encourage them to work hard and choose the correct behavior, thereby reducing the cost of the agents of shareholders and creditors.
(2) the company's capital structure affects the orientation of investor behavior. Ross believes that outside investors liabilities finance degree as to give the market a signal of the company's future operating results good or bad. When enterprises to improve the debt ratio, it means that the operators expect better operating results in the future. Music Rand and haiku Le operators (Leland and Pyle, 1997) stake transfer signal model that, in the case of asymmetric information, outside investors to the quality of the project or the expected return of the investment as the operator holding increasing function of the ratio. Mai Yesi and Meggie Musharraf (Myers and Majluf, 1984) that, in the case of asymmetric information, corporate finance should follow the following order: First, internal financing, debt financing, the last stock financing. Seen, in the case of asymmetric information, the choice of capital structure and adjustment can affect investors' decision-making behavior, which affect the company's cash flow and market value.
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