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Web of Proceedings - Francis Academic Press
Web of Proceedings - Francis Academic Press

Corporate Capital Structure and Financing Methods Analysis

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DOI: 10.25236/iceesr.2021.080

Author(s)

Eric Jiang

Corresponding Author

Eric Jiang

Abstract

Ownership structure and financing mode are not only two necessary components of enterprise capital structure, but also two basic levels of corporate governance structure. Equity and financing are not only two basic means of survival, but also two alternative corporate governance structures. From the perspective of enterprise capital structure, equity structure is the institutional arrangement and result of enterprise equity capital, which determines the distribution of shareholders' rights, responsibilities and interests and the effect of decision-making behavior. It belongs to the original structure of capital structure. The financing mode is the institutional arrangement and result of debt capital financing, which determines the distribution of creditor's rights, responsibilities and interests and the effect of decision-making behavior. It belongs to the derivative structure of capital structure. From the perspective of corporate governance structure, equity structure constitutes the basis and basis of equity governance. It is the institutional arrangement and important carrier to decide shareholders to play their role in corporate governance. It belongs to the internal structure of corporate governance. The financing structure constitutes the basis and basis of creditor's rights governance, and it is the institutional arrangement and important carrier for creditors to play their governance role. It belongs to the external structure of corporate governance. Shareholders should not only weigh the financial leverage effect, tax avoidance benefit effect and bankruptcy cost effect brought by debt financing, but also make use of the corporate governance effect (incentive and supervision, control transfer) and information transmission effect brought by financing. Therefore, different financing structure is the result of different debt financing decisions that shareholders (managers) choose to achieve their interest goals, and also reflects the different risk preference attitudes of shareholders (managers) to debt capital. The ownership structure is the institutional arrangement that determines the motivation and ability of shareholders to exert influence on the decision-making behavior of enterprises, as well as the way and effect. Therefore, this study has important theoretical value and practical significance.

Keywords

Ownership structure, Financing methods, Corporate governance