Investigation of the Capital Structure of Companies in Emerging Markets

Debt policy decisions of companies became the most popular topic among researches in Corporate Finance. The most important condition for the effective operation of an industrial enterprise is optimal capital structure. However, it is a difficult task to develop its for separate business entity in practice. The reason for this both the ambiguity of goals each enterprise in terms of achieving acceptable levels of return and risk, and the presence of multiple criteria of optimality of capital structure. Although the subject of corporate capital structure has been intriguing scientists for a number of years, very little research has been conducted on the sample of companies in an emerging market environment such as China. The objective of this course paper is to identify the main determinants of capital structure in case of large companies in developing countries during the period from 2012–2016. Both primary and secondary data were used for the study. The current research contains 5 parts. The first one is Background, Research Design and Strategy. In this part it is considered the history of appearance of capital structure question and given reasons why does this topic is actual nowadays. Second part, Literature Review, gives both traditional and modern approaches to choosing of capital structure. Two models of capital structure investigation and sampling are discussed in details in the next parts. The results of this paper are determinants description and research features of variables for constructing models for companies from emerging markets companies. These specific variables will have different effects on the final manager’s decision in China and other emerging markets. Based on these observations, some investigations will be made: what factors of capital structure are the most influencing in Chinese companies in comparison with another emerging, how these factors affect the value of the firm and shareholder value.