A Case Study of the Impact of Capital Structure on Corporate Performance of Zhongtai Manufacturing

Abstract

Capital structure plays a critical role in determining corporate financial performance, particularly in capital-intensive industries such as manufacturing. As firms navigate financing decisions, the balance between debt, equity, and capital costs can significantly impact their profitability, growth, and stability. This study examined the relationship between debt ratio, equity financing, and cost of capital on corporate performance in China’s manufacturing sector, providing empirical insights into how firms optimize their capital structures for sustainable financial success.
The objectives of this study were 1) to examine the impact of debt ratio on the corporate performance of Zhongtai Manufacturing, 2) to examine the impact of equity financing on the corporate performance of Zhongtai Manufacturing, 3) to examine the impact of cost of capital on the corporate performance of Zhongtai Manufacturing.
A quantitative research design was employed, using a structured questionnaire survey to collect data from 249 financial executives, CFOs, and senior managers in mid-sized and large manufacturing firms across China. A stratified random sampling approach was used to ensure diverse representation across firm ownership structures. Data were analyzed using descriptive statistics, Pearson correlation analysis, multiple regression analysis, and ANOVA to test the research hypotheses and determine the relationships between the independent and dependent variables.
The findings revealed that debt ratio negatively affected corporate performance, indicating that excessive reliance on debt reduces profitability due to high interest costs and financial risk. In contrast, equity financing positively influenced corporate performance, as firms with higher equity financing experience greater financial stability and investment capacity. Additionally, cost of capital was found to have a negative impact on profitability, reinforcing the need for firms to minimize financing costs to sustain financial growth.
This study concludes that firms must strategically balance debt and equity financing while optimizing capital costs to achieve sustainable financial success. Firms should reduce excessive leverage, strengthen equity financing, and secure low-cost capital sources to enhance profitability Policymakers and financial institutions can support manufacturing firms by providing favorable credit policies, such as lower interest rate loans, tax incentives for equity issuance, and improved access to long-term financing. These measures can help reduce the cost of capital, ease liquidity constraints, and encourage firms to adopt a more balanced and sustainable capital structure. Future research should explore sectoral differences, SME capital structures, and cross-country comparisons to expand the understanding of capital structure optimization in different economic contexts.

Keywords: debt ratio, equity financing, cost of capital, corporate performance

6617195419 Li Xiaoyang, Advisor: Dr. Zhang Li, สารนิพนธ์ (Independent Study), A Case Study of the Impact of Capital Structure on Corporate Performance of Zhongtai Manufacturing, นำเสนอในที่ประชุมวิชาการ (Conference), The 1st Thailand-Sino International Conference and The 17th National and International Academic Conference “New Quality Productive Forces and Sustainable Innovation”, ปริญญาโท (Master’s Degree), บัณฑิตวิทยาลัย (Graduate School), Master of Business Administration, Finance and Accounting, Siam University, Bangkok, Thailand – มหาวิทยาลัยสยาม กรุงเทพมหานคร ประเทศไทย