Capital Structure and Corporate Performance: A Case of China

This research focuses on the capital structure and the corporate performance in China. This research introduces different theories of capital structure. It reviews the studies conducted in different economic entities about this topic and combine with the current research in China, which can provide the evidences for this research to give the assumptions. This research uses three models, ordinary least squares (OLS), fixed effect (FE), and generalized method of moments (GMM) to process the data and find out the relationship between the capital structure and the corporate performance in China. The results of this research show a significant negative correlation between the leverage level and the return on assets of Chinese firms. It shows the relationship between the capital structure and the corporate performance. This research explains this relationship by the characteristics of Chinese market and tries to give suggestion for practice.