By studying the relationship between financial management objectives and capital structure theory, this paper discusses how to optimize the capital structure of enterprises. It is pointed out that the goal of financial management should be to maximize the value of enterprises, and financial leverage interest is an important index to measure the capital structure of enterprises. On the basis of analyzing the relevant factors affecting the capital structure of enterprises, this paper puts forward some suggestions on optimizing the capital structure of enterprises.
With the deepening of China's economic system reform, new requirements are put forward for the perfection and development of enterprise financial management system. How to scientifically set the optimal goal of financial management is of practical significance for studying the theory of financial management, determining the optimal structure of capital and effectively guiding the practice of financial management. On the basis of determining the optimal goal of financial management, this paper analyzes the relationship between the optimal goal of financial management (enterprise value maximization) and capital structure, and analyzes the debt management situation of Chinese enterprises by using the measurement index of capital structure (financial leverage interest).
First, the optimal goal of financial management-maximizing enterprise value
The goal of financial management is to deal with financial relations by organizing financial activities in a specific financial environment. Representative financial management objectives mainly include the following viewpoints: maximizing enterprise profits, maximizing shareholder wealth, maximizing enterprise value and maximizing enterprise economic benefits. According to the theory and practice of modern enterprise financial management, the author thinks that the maximization of enterprise value should be the optimal goal of financial management by comparing several main viewpoints of financial management objectives.
Enterprise value refers to the market value of all the assets of an enterprise, which is expressed by the remuneration obtained by the enterprise in a certain period of time (expressed by net cash flow) and the present value calculated by taking the risk return rate suitable for obtaining remuneration as the discount rate. Enterprise value is different from profit, which is only a part of newly created value. Enterprise value includes not only newly created value, but also potential or expected profitability. If v is used to represent the enterprise value; T stands for the specific time to get paid; NCF stands for the enterprise return (net cash flow of the enterprise) obtained in t years, and I stands for the expected risk return rate, so the enterprise value can be calculated by the following formula: v = nt =1ncft1(1+I) T. If it is assumed that the enterprise will continue to operate, that is, n→∞, and the annual NCF is equal, then v = According to the basic principle of financial management, reward and risk change in direct proportion, and the greater the reward, the greater the risk. The increase of risk will affect the survival and profitability of enterprises. Therefore, only when the return and risk of the enterprise reach a good balance can the value of the enterprise be maximized. There are two main reasons for taking enterprise value maximization as the financial management goal: (1) Taking enterprise value maximization as the financial management goal makes up for the shortage of profit maximization. If profit maximization is the goal of financial management, on the one hand, the relationship between the profits created by enterprises and the invested capital is not considered, which is not conducive to the comparison of enterprises with different capital scales or the same enterprise in different periods; On the other hand, it doesn't consider the time value and the risk value. It takes different time to obtain the same profit, and its value is different, so the risks it bears may be different. If the goal of financial management is to pursue the maximization of enterprise profits, it may also ignore the work of product development, production safety and social responsibility, leading to the occurrence of short-term behavior of enterprises. Financial management is to weigh the gains and losses of returns and risks, achieve the best balance between them, and maximize the value of enterprises. Taking the maximization of enterprise value as the financial management goal, we can measure the reward obtained by the enterprise according to the time value, and consider the relationship between reward and risk, so that the current income and future income of the enterprise will have an impact on the enterprise value and effectively avoid the occurrence of short-term behavior of the enterprise.
(B) Maximizing enterprise value as a financial management goal is more in line with China's national conditions.
In our country, some people think that the maximization of economic benefits of enterprises should be the goal of financial management, because economic benefits refer to the relationship between input and output, that is, to obtain the maximum benefits with a certain consumption of resources. This is a broader concept than profit, which is the synthesis of three quantitative indicators: one is the value indicator expressed by the absolute number and relative number of capital, cost and profit; The second is the physical quantity index expressed by output, quality and market share; The third is the efficiency index expressed by labor productivity, asset profit rate and value-added rate. It is considered that the first indicator reflects the actual profit level of the enterprise, and the second and third indicators reflect the potential profit level or future value-added ability of the enterprise. Therefore, the time factor is added to the profit, and it can be considered that the time value and risk value are taken into account. The author thinks that because the profit index reflecting the profit level of an enterprise is calculated according to the accrual basis, the time value is not considered. This view that the potential profitability or future value-added ability reflects the time value is unfounded in theory and difficult to measure in practice. Taking the maximization of enterprise value as the financial management goal reflects a profound understanding of economic benefits, which not only considers
The relationship between risk and reward will also affect the coordination of enterprise financial management activities and the relationship between stakeholders, so that enterprise owners, creditors, employees and the government can meet their own interests in the growth of enterprise value, thus making enterprise financial management and economic benefits enter a virtuous circle. Therefore, maximizing enterprise value should be the optimal goal of financial management.
Second, the capital structure theory and enterprise value maximization
Capital structure theory is one of the main research results of contemporary western financial theory. The capital structure of enterprises is formed by different financing methods, which is manifested in the composition of long-term capital of enterprises and its proportional relationship, that is, the structure of long-term liabilities, preferred shares and common equity on the right side of the balance sheet of enterprises. Various financing methods and their different combination types determine the capital structure of enterprises and its changes. What is the relationship between the change of capital structure and enterprise value? When the capital structure of an enterprise is in what state, can the enterprise value be maximized? This relationship constitutes the focus of capital structure theory. Among them, MM theorem founded by modigliani and Miller is considered as a classic of contemporary financial management theory.
(A) the development stage of MM theory
1 original MM theory (capital structure theory without tax)
The original MM theory is the basic idea elaborated by American professors modigliani and Miller in the article Capital Structure, Corporate Finance and Capital published in June, 1958. The theory holds that the capital structure of a company has nothing to do with the market value of the company without considering the enterprise income tax and the same business risk but different capital structure. In other words, when the company's debt ratio increases from zero to 1 0%, the total cost and total value of the enterprise will not change, that is, the enterprise value has nothing to do with whether the enterprise is in debt or not, and there is no optimal capital structure problem.
2 modified MM theory (tax-included capital structure theory)
The modified MM theory is the basic idea of another paper related to capital structure published by MM in 1 96 3 * *. They found that considering the enterprise income tax, because the interest on liabilities is tax-free expenditure, the comprehensive capital cost can be reduced and the enterprise value can be increased. Therefore, as long as the company continuously reduces its capital cost through increasing financial leverage, the more liabilities, the more obvious leverage and the greater the company value. When the debt capital is close to the capital structure
1 0 0% is the best capital structure and the enterprise value reaches the maximum. The original MM theory and the modified MM theory are two extreme views on debt distribution in the capital structure theory.
3 Miller model theory
Miller model is the basic idea elaborated by Miller in the report made by American Finance Institute in 1 976. This model revises the revised MM theory with personal income tax, and thinks that the revised MM theory overestimates the income of debt. In fact, personal income tax offsets the interest income of personal investment to a certain extent, and the loss of personal income tax they pay is roughly equal to the company's debt collection, reducing corporate income tax. So Miller's model returned to the original MM theory.
The theory is in the middle.
4 Trade-off model theory
According to this theory, MM theory ignores two factors in modern society: financial constraint cost and agency cost, but as long as debt management is used, financial constraint cost and agency cost may occur. After considering the above two factors, the value of the enterprise using debt should be determined according to the following formula: the value of the enterprise using debt = the value of the enterprise without debt+the tax reduction benefit of using debt-the expected present value of financial constraints-the expected present value of agency costs. The above formula shows that debt can bring tax reduction effect to enterprises and increase enterprise value; However, with the increase of tax reduction income of liabilities, the present value of the two costs will also increase. The optimal capital structure of the company can only be determined by balancing the tax reduction income of liabilities with the financial constraints and agency costs caused by liabilities. That is, when the tax reduction income is equal to the sum of the present value of the two costs, the optimal capital structure should be the debt ratio.
(B) the enlightenment of the capital structure theory to us
The important contribution of capital structure theory is not only to put forward the financial proposition "whether there is an optimal capital structure"; Moreover, we believe that there is an optimal combination of capital structure objectively, and we have the following clear understanding of capital structure:
1 Debt financing is the lowest cost financing method. Among the various sources of funds for enterprises, the interest of debt funds is paid before enterprise income tax, and the risk borne by creditors is relatively less than that of investors, and the required rate of return is lower. Therefore, the cost of debt funds is usually the lowest. When there is enterprise income tax, debt financing can reduce the comprehensive capital cost and increase the company's income.
The lowest cost financing method is not necessarily the best financing method.
Due to the function and influence of financial constraint cost and agency cost, excessive debt will offset the increase of tax reduction. Because, with the increase of the debt ratio, the interest expenses of enterprises are increasing, the possibility of losing the solvency of enterprises is increasing, and the financial risks of enterprises are increasing. At this time, enterprise investors and creditors will demand corresponding compensation, that is, to improve the rate of return on capital, thus greatly increasing the comprehensive capital cost of enterprises.
3 The optimal capital structure exists objectively.
Although the capital cost of debt financing is lower than other financing methods, it cannot be measured by the cost of individual capital. Only when the total capital cost of enterprises is the lowest can the debt level be more reasonable. Therefore, there is an optimal capital structure combination objectively. In financing decision-making, enterprises should constantly optimize the capital structure and make it reasonable until they reach the capital structure with the lowest comprehensive capital cost, so as to achieve the goal of maximizing enterprises.
Three, an important indicator to measure the capital structure-financial leverage.
Because enterprises generally adopt the combination of debt financing and equity financing, the resulting capital structure is generally called "leveraged capital structure", and its leverage ratio is the proportional relationship between debt capital and equity capital in the capital structure. Therefore, the interest of financial leverage has become an important index to measure the capital structure of enterprises and evaluate the debt management of enterprises.
Financial leverage interest is the amount that an enterprise uses debt to affect the return on common stock. The focus of financial leverage theory is the expanding effect of debt on shareholders' compensation. The measurement formula is as follows:
Common stock profit rate = investment profit rate+debt shareholders' equity × investment profit rate-debt interest rate ×( 1- income tax rate) As can be seen from the above formula. When all the funds of the enterprise are equity funds, or when the investment profit rate of the enterprise is consistent with the debt interest rate, the enterprise will not form financial leverage interests; When the investment profit rate is higher than the loan interest rate, the existence of borrowed funds can improve the profit per share of common stock, which shows positive financial leverage interest. When the investment profit rate is lower than the debt interest rate, the common stock profit rate will be lower than the after-tax investment profit rate, and the shareholder's income will drop, which is manifested as negative financial leverage interest. In order to make full use of positive financial leverage interests and limit or eliminate negative financial leverage interests, we should pay attention to the following two aspects:
(A) improve the profitability of enterprises
Because the profit rate of enterprise investment changes positively with the income of financial leverage, the improvement of enterprise profitability is conducive to the improvement of positive financial leverage. Enterprises should take measures such as rational allocation of assets, accelerating capital turnover, reducing product costs, improving product quality and structure, etc., to promote the growth of enterprise profitability. Take the weighted average interest rate of various liabilities of enterprises as the lowest control line of investment profit rate to prevent negative financial leverage. Therefore, enterprises should pay attention to the coordination and balance between investment return and business risk when pursuing high investment return.
(B) reduce corporate debt interest rates
Corporate debt interest rate and financial leverage interest change in opposite directions, and lowering debt interest rate can increase financial leverage interest. Enterprises should compare the credit status of various financial institutions and the characteristics of various borrowing methods, and choose debt funds that are necessary for the production and operation of enterprises and have low interest costs. If the interest rate is expected to rise in the future, enterprises should choose loans with fixed interest rates to avoid the increase of interest expenses, otherwise, choose loans with floating interest rates. In addition, enterprises can also reduce the real interest rate of loans to the maximum extent by choosing reasonable repayment methods; According to the requirements of enterprise asset allocation, optimize the loan structure and make maximum use of short-term loans without increasing financing risks. Four. The main factors to be considered in optimizing the capital structure The key to measure whether the capital structure is reasonable is to determine the appropriate ratio of liabilities to shareholders' equity. When the capital structure of an enterprise is optimal, the financial leverage benefits are the greatest. Theoretically, the difference between investment profit rate and debt interest rate is positive, and the higher the debt ratio, the greater the positive financial leverage. On the contrary, the difference is negative, and the debt ratio should not be too high to prevent ordinary shareholders from suffering greater losses. Of course, there is no uniform standard for the appropriate debt ratio of enterprises. In practical work, in addition to the benefits of financial leverage, the following factors should also be considered:
(A) economic cycle factors
Under the condition of market economy, the economy of any country will not grow or decline for a long time, but develop in fluctuation. This kind of fluctuation generally presents a cyclical cycle of recovery, prosperity, recession and depression, which is the economic cycle. Generally speaking, in the stage of economic recession and depression, due to the overall macroeconomic depression, most enterprises have difficulties in operation, and their financial situation is often in trouble or even worse, resulting in poor economic benefits. In the meantime, it is wise for enterprises to reduce their debts as much as possible, or even adopt the strategy of "zero debt". In the stage of economic recovery and prosperity, generally speaking, because the economy is out of the trough and the market supply and demand are booming, most enterprises have stable sales and unchanged profit levels.
Rising, at this time, enterprises should increase their debts, seize the opportunity and develop rapidly.
(B) environmental factors of market competition
Even if enterprises are in the same macroeconomic environment, they should not generalize their debt levels because of different market competition environments. Generally speaking, enterprises in monopoly industries in market competition, such as gas, tap water, electric power and other enterprises in China at present, as well as enterprises in monopoly positions in the same industry, will not have problems in sales, and their production and operation will not fluctuate greatly, so their profits will rise steadily. Therefore, we can appropriately increase the debt ratio to use debt funds, improve production capacity, form economies of scale, and consolidate our monopoly position; For general competitive enterprises, because their sales are completely determined by the market, prices are easy to fluctuate and profits are difficult to stabilize. Therefore, it is not appropriate to raise funds through debt too much.
(3) Industry factors
Different industries have different capital structures due to different contents of production and business activities. The financing of commodity circulation enterprises is mainly to increase inventory, which has a short turnover period and strong liquidity, and its debt level can be relatively high; For those enterprises that have high risks, need a lot of research funds and have a particularly long trial period, it is obviously inappropriate to use debt funds too much.
(4) Expected investment benefits.
If the investment benefit is expected to be good and the industry or product is on the rise, the debt ratio should be appropriately increased, the scale of production and operation should be expanded, and the financial leverage benefit should be used; On the other hand, if the production, operation and benefit are expected to decline, the liabilities should be appropriately reduced, the scale of production and operation should be reduced, and financial leverage risks should be prevented. In addition, the attitude of enterprises towards risks is also an important factor affecting the debt ratio of enterprises. Those enterprises that are optimistic about the economic development prospects, enterprising and adventurous tend to arrange higher debt ratio; Those who are pessimistic about the future trend of the macro economy, or are afraid of being known for their steadiness, will only use less debt funds.
References:
[1] Wang Man's thoughts on corporate debt management [J], research on financial problems, 1 997, (8)
[2] Wang Huacheng on financial management objectives [J], Finance and Accounting, 1 999, (3)