Empirical analysis on effect of debt financing on equity structure of listed companies

Effect of debt financing on equity structure is such a functioning mechanism, process and its result of equity structure change and thus leading to company performance variation by analyzing debt ratio variation from perspective of correlation between debt financing and equity structure. Through empirical analysis of listed China companies, this paper concluded that effect of debt financing on equity structure was very weak and its acting direction was negative, too, rather than enhancing company performance, it hampered company performance. This negated argument that debt can enhance company performance by equity structure optimization as proved by financing structure theory, as well as practice of western countries and facts empirically testified by western scholars.