Research on the Effect of Debt Financing in Electric Power Listed Company

Abstract

This paper investigates the effect of debt financing in electric power listed company through an empirical research with the regression analysis method. According to the capital structure theory, the effect of debt financing lies in financial leverage effect, the tax shield effect and the company governance effect. Considering the characteristics of the electric power industry, we makes a detailed study relying on the data of electric power listed companies from 2004-2006, which belongs to the security markets of Shanghai and Shenzhen. The empirical results show that, for the companies with strong profitability, raising the debt ratio can contribute to the improvement of the effect of debt fiancing; for the companies with poor profitability, it will cause worse effect. These researches help to make suggestions for improving the effect of financing.