Research on the Impact Mechanism and Optimization Path of Capital Structure on Enterprise Value

Abstract

Capital structure, as the core issue of corporate financial decision-making, has a crucial impact on the enhancement of corporate value through its rationality in three key dimensions: financing costs, governance efficiency, and risk management. In the current process of China's economic transformation and upgrading, as well as the improvement of the capital market, some enterprises have problems with imbalanced capital structures, such as excessive reliance on debt financing to increase financial risks, concentration of equity leading to inefficient governance, and restricting the release of enterprise value. This article is based on the MM theory and the trade-off theory, using the normative research method to analyze the impact mechanism of capital structure on enterprise value through three paths: financing costs, corporate governance, and financial risks. Combined with the practical characteristics and constraints of China's enterprise capital structure, an optimization path is proposed. Research has shown that there is a non-linear correlation between capital structure and corporate value, and a reasonable structure requires achieving dynamic balance between debt and equity financing; Enterprises should combine their lifecycle, industry characteristics, and market environment to improve capital allocation efficiency by optimizing financing structure, improving governance, and expanding channels. The research provides practical reference for corporate capital structure decision-making and theoretical support for the improvement of capital market systems.