A study on the relationship between capital structure and corporate governance toward innovative firm

Abstract

This paper investigates how the capital structure and the allocation of control rights can be used as a commitment mechanism to encourage non-contractable managerial initiative. This paper builds the framework to analyze how the capital structure influences the corporate governance. This framework includes the analysis of both equity structure and liability structure. In this framework, the article analyzes the influence of the equity structure and liability structure of the listed Chinese corporations on governance. What's more, based on the analysis, the paper put forward advices about how to improve the governance structure of innovative firm.