Empirical study on capital structure and firm performance relationship of knowledge-intensive business services

Abstract

This paper empirically tests the relation between capital structure and firm performance in China. We selected sample consists of knowledge-intensive business services (KIBS) firms from Shanghai and Shenzhen stock markets in 2008. Empirical study shows that the proportions of intangible asset and capital structure have a weak positive correlation. We also find that asset-liability ratio is negative to firm performance. Contrary to bank loan debt ratio, business credit debt ratio is positive to firm performance. This study is significant to optimize capital structure of China listed companies in the KIBS industry.