A study on the impact of capital structure on corporate performance of listed IT firms in China

Abstract

This paper examines the relationship between capital structure and corporate performance, involving few top performance listed IT firms in China. In business world, most of the finance authorities regard the capital structure as an important indicator for bankers or investors to analyze the risk level and future performance of the firm. We utilized the regression model to examine the impact of corporate profitability on its financial leverage. We found that there was a significant negative relationship between capital structure and corporate performance in Chinese listed IT firms. Our results showed that financial leverage as the sources of company to generate profits, however, they are negatively related, but firm size and leverage are positively related to each other. Our findings suggest that if firms in IT industry intend to generate high profits, they’d better lower their financial leverage, when they intend to grow in size, they may raise their debt to achieve that.