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2661Recently, more literature studies the firm capital structure decision from a dynamic perspective. After reviewing the literature, we propose that the dynamic adjustment of firm capital structure is affected by factors in three aspects: adjustment motivation, adjustment ability and adjustment opportunity. Meanwhile, the Chinese government has been pushing hard the construction of high-speed railway. The literature documents that the opening of high-speed railway plays a positive role in improving corporate governance and business environment. We are concerned about whether the opening of high-speed railway will improve the adjustment of firm capital structure.
We propose that, the opening of high-speed railway can affect the speed of capital structure adjustment through increasing adjustment motivation, ability as well as opportunity. Firstly, the opening of high-speed railway can reduce the information asymmetry between investors and firms and strengthen external supervision. It can also promote managerial labor market competition, so as to increase manager adjustment motivation. Secondly, the opening of high-speed railway enhances the learning effect of managers and helps to improve manager adjustment ability by promoting the exchange of talents and the dissemination of knowledge. Finally, the opening of high-speed railway can reduce financing costs and provide more opportunities for capital structure adjustment by improving corporate governance, manager ability and firm value.
Using the sample of China’s A-share listed firms from 2003 to 2017, this paper examines the impact of high-speed railway coverage (hereinafter, HSR) on the dynamic adjustment of firm capital structure. The results show that HSR has a positive impact on the speed of capital structure adjustment, and when the capital structure deviates from the target upward, the relationship is more economically significant. Additionally, this relationship is more pronounced for firms with poor information environment, private firms, years with tight monetary policy, and firms located in cities with lower railway passenger volume and less industry companies. As to the way to adjust, for firms that deviate from the target downward, HSR increases their debt financing and reduces equity financing; while for firms that deviate from the target upward, HSR increases their equity financing and reduces their debt financing. Further, the dynamic adjustment of firm capital structure is also affected by HSR in neighboring cities.
This paper adds to the literature on both the dynamic adjustment of firm capital structure and the opening of high-speed railway. Capital structure is one of the most important financial decisions of firms and even affects the macro economy. To improve the firm capital structure strategy, we must improve the factor market environment and the efficiency of resource allocation. In addition, infrastructure construction helps to eliminate market segmentation and build a national market. It not only has a positive impact on macroeconomic development, but also has a far-reaching impact on the specific decision-making of firms.
