Study on Capital Structure and Corporate Performance: Evidence from China

This study intends to find out how the capital structure is useful to achieve the firms' performance. The paper used the panel data of 98 Chinese listed companies on the Shanghai and Shenzhen Stock during the period 1999-2003 to, examine the relationship between the capital structure and the firms' performance. The analysis of data reveals a strong relationship between the ratio of short-term debt to total assets, the ratio of total debt to total assets and the performance of the firms. However, a negative relationship between the ratio of long-term debt to total assets and performances ratio was found. This study suggests that firms that perform well should base their financing strategy on debt financing.