Group Finance Companies and Dynamic Adjustment of Capital Structure of Related Listed Companies

ABSTRACT Using the data of all A-share listed companies from 2009 to 2018, we find that the group finance companies inhibit the dynamic adjustment speed of capital structure to their optimal level of the related listed companies. The reason is that the controlling shareholders may occupy the related deposits of listed companies in the finance companies. We find that the inhibition effect is more significant when the controlling shareholders’ shareholding ratio is low and the related party transactions are high, and is weakened after the implementation of the deleveraging policy. Moreover, the inhibition effect is significant in both the upward and downward adjustment processes. In addition, the finance companies make the deviation of capital structure of listed companies larger, and this effect is mainly reflected in upward deviation. We also find that the functions of finance companies will affect the dynamic adjustment of capital structure of listed companies.


Introduction
The research on the factors influencing the dynamic adjustment of capital structure has always been a hot topic for scholars.Previous studies mainly focused on the characteristics of companys (Byoun, 2008;Drobetz & Wanzenried, 2006), Economic environment (Cook & Tang, 2010;Korajczyk & Levy, 2003; Z. Q. Wang & Hong, 2009), institutional environment (Jiang & Huang, 2011;Sheng et al., 2012), etc.The finance company of business group is the product of the reform of company system and financial system in China, and is one of the important components of China's financial system.At present, there is no literature to study the impact of group finance companies on the dynamic adjustment of company capital structure, and this paper has made a first attempt.
In this paper, we propose two opposite hypotheses.On the one hand, the construction of internal capital market through finance companies may promote the dynamic adjustment of capital structure of listed companies through the more-money effect and smartmoney effect.On the other hand, building internal capital market through finance companies may inhibit the dynamic adjustment of capital structure of listed companies through tunnelling effect.
Based on the data of A-share listed companies from 2009 to 2018, this paper empirically tests the relationship between finance companies and the dynamic adjustment of capital structure of related listed companies.The research results show that: If the listed company has a related finance company, the dynamic adjustment of the capital structure of the listed company will be significantly inhibited.The possible reason is that the controlling shareholders will occupy the related deposits of listed companies through the finance companies, which will inhibit the dynamic adjustment of capital structure of listed companies.Further research shows that the inhibition is more significant when the shareholding ratio of the controlling shareholders is low and the related party transactions are high, but it will weaken after the implementation of the deleveraging policy.Moreover, the inhibition is significant in both upward and downward adjustment processes.In addition, finance companies will make the deviation between the actual capital structure and the target capital structure of listed companies greater, which is mainly reflected in the upward deviation.We also find that the functions of finance companies will affect the dynamic adjustment of capital structure of listed companies.
We think this paper contributes the extant literature from three aspects.First, this paper expands the research on the economic consequences of group finance companies from the perspective of corporate capital structure decision-making.As one of the specific manifestations of the internal capital market, finance companies have less research on their economic consequences, mainly from the perspective of controlling shareholders using finance companies to occupy deposits of listed companies (Dou & Lu, 2016), and have not yet involved the investigation of capital structure decisions of listed companies.This paper examines the impact of finance companies on the dynamic adjustment of capital structure of related listed companies and its impact mechanism, and further analyzes the impact of shareholding ratio of controlling shareholders, related party transactions, deleveraging policies and functions of finance companies on the dynamic adjustment of capital structure, as well as the impact of finance companies on the degree of deviation of capital structure of listed companies, which helps to realise the economic consequences of finance companies more comprehensively, and deepens the understanding of its mechanism.
Secondly, this paper enriches the literature on the dynamic adjustment of corporate capital structure from the perspective of related finance companies.At present, there are few literatures studying the dynamic adjustment of company capital structure from the perspective of company characteristics.Some literatures start from the aspects of company size, financing constraints and profitability (Byoun, 2008;Korajczyk & Levy, 2003;Tong, 2004), but have not yet studied from the perspective of finance companies.This paper explores the dynamic adjustment of company capital structure from the perspective of finance companies, which enriches the literature in the field of dynamic adjustment of company capital structure.
Thirdly, this paper enriches the positive effect of deleveraging policy from the perspective of internal capital market of business groups.This paper finds that after the government issued the deleveraging policy, the inhibitory effect of group finance companies on the dynamic adjustment of capital structure of listed companies was weakened.
The existing literature focuses on the effect of deleveraging policy at the level of listed companies.For example, Ma and Zhang (2021) believe that real companies will increase their holdings financial assets after deleveraging.X. K. Wang et al. (2021) found that deleveraging policy can effectively improve company performance.This paper enriches the research on deleveraging policy from the level of business groups.

Literature review
Finance companies originated from western capitalist countries, and the earliest embryonic form can be traced back to 1716 established in France's General Bank.In the late 1950s, large American multinational corporations set up their own group finance companies.Compared with foreign countries, the history of finance companies in China is relatively short.The first finance company in China, namely the Finance company of Dongfeng Automobile Industry Group, was approved and established in 1987.In the reformation of state-owned companies, the finance company in Chinese business group was produced to cultivate and develop 'large companies and large groups', which is not only the objective requirement of the development of business group, but also the inevitable product of our economic system and financial system reform.The State Council has taken 'pilot business groups should gradually establish finance companies' as an important policy to develop companies.In fact, the internal capital market formed by finance companies also becomes one of the objective requirements and main advantages of the development of business groups (Wei & Wan, 2006).
Based on principal-agent theory and internal capital market theory, scholars have widely discussed the establishment of group finance companies.Some scholars believe that the establishment of group finance companies is conducive to the increase of business group value (Ileen & Malitz, 1989).When the external capital market is not perfect, the internal capital market can effectively make up for the defects of the external capital market.For example, Stein (1997) found out through research that in order to obtain more profits, companies may invest limited resources in projects with higher return rate through internal capital market.F. J. Wang and Su (2013) and Almeida et al. (2014) believe that intra-group members can alleviate financing constraints through mutual loan and mutual insurance to realise the 'more-money effect' in the internal capital market.Meanwhile, the parent company of the group can allocate funds to the most efficient investment projects through the mechanism of 'picking winners', which realises the 'smart-money effect' of internal capital market.
However, internal capital market are not always good for the business group, especially in the transition economic stage.The original internal capital market based on efficiency motivations is partially alienated as the channel of 'interest transmission'.Managers may engage in rent-seeking behaviour and power struggle for personal interests, which will distort the allocation of resources in the capital market within the group, leading to crosssector subsidies and egalitarianism (Glaser et al., 2013).Some scholars study the 'family company'.They find that the major shareholder may use the internal capital market to tunnel the company, and draw the conclusion that the internal capital market is ineffective (Shao & Liu, 2007).Dou and Lu (2017) found that major shareholders may use the group finance company to excessively occupy the funds of the listed company, damage the earnings persistence of the listed company, and further infringe on the interests of minority shareholders.
The above summary and analysis of the literature shows that scholars have not reached a unified conclusion on the effectiveness of the internal capital market of companies.The role of the group finance company depends on the motivation of the group's major shareholders and the perspective of research.The research of this paper mainly investigates the impact of group finance companies from the perspective of listed companies, which will help to enrich the previous relevant literature on group finance companies.

Theoretical analysis and hypothetical development
Many scholars have found that there is indeed an optimal capital structure, and companies should quickly adjust to the target capital structure after considering the adjustment cost.However, the companies' practices are not like that in the real world and the dynamic trade-off theory of capital structure cannot fully explain such behaviour (Fama & French, 2002;Lemmon & Zender, 2008).There may be other factors that affect the dynamic adjustment of company capital structure.This paper focuses on the study of group finance companies.From the purpose of setting up a finance company, capital can be effectively allocated and company value can be enhanced through the capital market within a business group.According to Williamson (1975), in M-shaped companies with high ownership concentration, the internal capital market can improve the allocation efficiency and alleviate the defects of the external capital market.Zhou and Han (2003) discovered the internal capital market of Chinese listed companies by studying Hualian backdoor listing.However, with the gradual development of the theory on capital market and the feedback from the practices, scholars have completely opposite cognition on the effectiveness of internal capital market.
On the one hand, the establishment of internal capital market by finance companies may promote the dynamic adjustment of capital structure of listed companies through the more-money effect and smart-money effect.Firstly, when the external financing environment of business groups is constrained, the internal capital market can alleviate this situation (Stein, 1997;Zhou & Han, 2003), the group company effectively allocates funds internally to give full play to the due efficiency and benefit of funds, resulting in the more-money effect.In fact, the finance company is equivalent to forming a capital reservoir.When the listed company has excess funds, it can deposit them in the finance company.When the listed company needs funds, it can borrow from the finance company, so as to meet its own needs of adjusting the capital structure.Secondly, compared with the external capital market, business groups have a more comprehensive understanding of the information in the internal capital market, which can effectively alleviate the problem of information asymmetry (Williamson, 1975), so that the business group can make overall management of cash flow and invest funds in projects with higher rate of return to achieve better allocation of group resources (Stein, 1997), resulting in the smart-money effect, which can effectively improve the allocation efficiency of capital and accelerate the flow of capital within the business group.It may promote the dynamic adjustment of the capital structure of listed companies.
On the other hand, the construction of internal capital market by finance companies may inhibit the dynamic adjustment of capital structure of listed companies through tunnelling effect.For example, Yang (2006) and Huang and Fang (2012) all believe that the internal capital market may become a channel for major shareholders to tunnel listed companies, and it will also cause agency problems between the headquarters of business groups and member companies.The internal capital market may also intensify the rent-seeking behaviour among the members and managers of the business group, thus distorting capital allocation (Zou & Qian, 2005).Dou and Lu (2016) also found that the controlling shareholders would absorb the funds of the listed company at a low cost through the finance company, and then provide high-interest loans to other subsidiaries, making the finance company a channel for the controlling shareholders to occupy the funds of the listed company.In view of the above analysis, this paper uses two cases to support it: according to the report of National Business Daily on 4 August , as of 31 December 2020, relevant data of Jizhong Finance Company showed that Jizhong Group had deposits which were RMB 1.91 billion and loans which were RMB 17.68 billion.Jizhong Energy had deposit which were RMB 10.998 billion, and loans which were 0. Huabei Pharmaceutical had deposits which were RMB 2.35 billion and loan which were 0. Jizhong Energy and Huabei Pharmaceutical are subsidiaries of Jizhong Group, which is the parent company.Jizhong Group's behaviour of obtaining a large amount of loans from the finance company has attracted extensive attention of investors, which has led to the general concern of investors about Jizhong Group's occupation of subsidiary related deposits.According to the 2020 annual report of COSCO SHIPPING Holding Co.,Ltd., the amount of related deposits with COSCO SHIPPING Group Finance Co., Ltd. in 2020 was RMB 17,427,473,111.38, the interest income was RMB 88,401,773.44, and the deposit interest rate was about 0.507%.In 2020, the amount of related loans was RMB 2,007,800,000.00, the interest expense was RMB 55,181,286.32, and the borrowing interest rate was about 2.748%.The borrowing rate is much higher than the deposit rate.The above analysis shows that the controlling shareholder may occupy the related deposits through the finance company, which leads to the listed company's unsatisfied demand for funds and can only obtain high-interest loans from the outside world, thus weakening the ability of the listed company to adjust its capital structure.From the perspective of listed companies, group finance companies may, in order to safeguard the interests of major shareholders, form a 'tunnelling effect', which damages the interests of small and medium shareholders of listed companies, thus having a negative impact on the dynamic adjustment of listed companies' capital structure and inhibiting them from adjusting to the optimal capital structure.
Based on the above analysis, we propose two competitive research hypotheses: Hypothesis 1a: Related finance companies will promote the dynamic adjustment of capital structure of listed companies to the target capital structure.
Hypothesis 1b : Related finance companies will inhibit the dynamic adjustment of capital structure of listed companies to the target capital structure.

Sample selection and data source
The initial sample of this paper selects the data of all A-share listed companies from 2009 to 2018, so as to empirically test the influence of group finance companies on the dynamic adjustment of related listed companies' capital structure.The key variable FINANCE is derived from manual collection, firstly, we collect finance companies list from the China association of finance company's official website, and manually find the actual control of finance company, if the actual controllers control the A-share listed companies, then we determine the listed company and finance company belongs to a business group and are related, then define the FINANCE as 1 and 0 otherwise.1Other explanatory variables and control variables were obtained from the CSMAR database.
According to previous studies, the data were processed as follows: (1) Delete samples of ST listed companies; (2) Delete samples of listed companies in the financial industry (3) Delete samples less than two consecutive years considering that at least two consecutive years of samples are needed to calculate the speed of capital structure adjustment; (4) Delete missing observations from variables.Finally, a total of 19,353 sample observations were obtained.In order to reduce the influence of extreme values, all continuous variables are winsorised by 1% and 99%.

Model construction and variable definition
Firstly, drawing on the practice of existing literatures, the research model of this paper adopts the standard partial adjustment model as the basis to measure the capital structure adjustment speed of listed companies (Lemmon & Zender, 2008;Rangan & Flannery, 2006), Model (1) is as follows: In the above model, LEV i,t represents the interest-bearing debt ratio of company i in year t, D i,t represents the interest-bearing liabilities of company i in year t, A i,t represents the total assets of company i in year t, and LEV i,t * represents the target capital structure of company i in year t, namely the optimal capital structure.λ is the speed of capital structure adjustment.According to the practice of Rangan and Flannery (2006) and Byoun (2008), the following model ( 2) is adopted to estimate the target capital structure, namely the optimal capital structure.
In model (2), X i,t are a series of factors that will affect the capital structure.With reference to the practices of Jiang and Huang (2011)  According to the practice of S. Zhang et al. (2017), on the basis of model (3), we add the key explanatory variables and the interaction terms of the key variable and LEV, that is, the impact of this key variable on the speed of capital structure adjustment can be studied.In this paper, it specifically refers to the added dummy variable FINANCE i,t of the finance company and the interaction term of FINANCE i,t and LEV i,t-1 , and finally obtains the following model (4): Model ( 4) is the main model of empirical research.At this time, the capital structure adjustment speed is λ'=λ-θFINANCE, and FINANCE is a dummy variable, which is nonnegative, so when θ is greater than 0, the capital structure adjustment speed will weaken, and when θ is less than 0, the capital structure adjustment speed will accelerate.
In order to test the influence of the finance company on the deviation degree between the actual capital structure and the target capital structure of the related listed companies, the model ( 5) was established by referring to the practices of Jiang et al. (2008) and Sheng et al. (2012), the DIS i,t =|LEV i,t -LEV* i,t |, on behalf of deviation degree of the actual capital structure and target capital structure.

Descriptive statistics
Table 2 reports the results of descriptive statistics.It can be seen that the mean value of interest-bearing debt ratio LEV is 0.19, which is quite consistent with S. Zhang et al. (2017).At the same time, it can be seen that the minimum value of interest-bearing debt ratio LEV in the sample interval is 0 and the maximum value is 0.663, showing a large gap.The mean value of variable FINANCE is 0.112, that is, about 11.2% of listed companies in the sample of this paper have related finance companies, indicating that the number of finance companies in China at

Correlation analysis
Table 3 shows Pearson correlation coefficient test of main variables.It can be seen that the explanatory variable FINANCE, the mechanism test variable DEPOSIT and the control variable selected to estimate the target capital structure are all significantly correlated with the interest-bearing debt ratio LEV.At the same time, the correlation coefficient between the explanatory variable FINANCE and each control variable is less than 0.5, and the correlation coefficient between the mechanism test variable DEPOSIT and the control variable is also less than 0.5, VIF test shows that the VIF value of each variable is less than 10, and there is no multicollinearity relationship between each variable.

Research hypothesis test
This paper uses model (4) to verify the main hypotheses H1a and H1b, and the empirical test results are shown in Table 4.In column (1), only the interaction term, the lag phase of interest-bearing liabilities and the key variable FINANCE are added, and the fixed effects of industry and year are controlled at the same time.The results show that the coefficient of the interaction term is 0.032, and it is significant at the level of 1%.According to the above analysis, the coefficient of the interaction term is significantly positive, indicating that finance companies have inhibitory effects on the dynamic adjustment of the capital structure of related listed companies, and preliminarily verifying hypothesis H1b.Control variables are added to the regression model in column (2), the coefficient of the interaction term is 0.033 and is significant at the level of 1%, indicating that the existence of related finance companies will indeed inhibit the dynamic adjustment of the capital structure of listed companies, thus proving the hypothesis H1b.Dou and Lu (2017) believe that the controlling shareholder may occupy the funds of the listed company in the form of related deposits2 through the finance company, thus affecting the earnings persistence of the listed company.Based on this, this paper makes a hypothesis that the controlling shareholder uses the group finance company to occupy the funds of the listed company, which weakens the ability of the listed company to adjust the capital structure, and then inhibits the dynamic adjustment of the capital structure of the listed company.This paper verifies the validity of the above mechanism by manually collecting the data of related deposits between listed companies and finance companies.

Research mechanism test
The empirical test results are shown in Table 5.In column (1), only the interaction term, the key variable DEPOSIT and the lag phase of interest-bearing debt ratio LEV are added, and the results show that the coefficient of the interaction term is 0.029, which is significant at the level of 1%, preliminarily verifying the inhibitory effect of related deposits on the dynamic adjustment of the capital structure of listed companies.In column (2), all the other relevant control variables are added, and the results show that the coefficient of the interaction term is 0.032, which is significant at the level of 1%, again verifying the inhibitory effect of related deposits on the dynamic adjustment of the capital structure of listed companies, indicating that the above mechanism has indeed produced an effect.

Robustness tests
In order to ensure the reliability of this study, a series of robustness tests are carried out to verify it.

Replace the sample year interval
The sample interval of this paper is from 2009 to 2018.However, as the model involves the lag phase of the control variable and the variable GROWTH contains the operating revenue of the last phase, the relevant data of 2007 and 2008 are included in the sample of this paper.Due to the global financial crisis erupted in 2008 has a huge impact on Chinese capital market, interest-bearing debt ratio apparent decline, in order to eliminate the impact of financial crisis on the experimental results, this paper change the sample interval, using the sample interval of 2011-2018 to estimate model ( 4), to ensure that the samples of all the data began in 2009, that is, after the financial crisis in 2008, the empirical results are shown in column (1) of Table 6.The coefficient of the interaction term is 0.037, which is significant at the level of 1%.The empirical results also support the above conclusion that finance companies will inhibit the dynamic adjustment of the capital structure of listed companies.This paper expects that the strong impact of the global financial crisis on the capital market will last for a long time.In order to further exclude its impact, the sample interval from 2012 to 2018 is used for regression.The results are shown in column (2) of Table 6.Again, empirical results support this conclusion.

Controlling firm-level fixed effects and replacing explained variables
In order to alleviate the endogeneity problem caused by the influence of the company level, this paper added company fixed effects on the basis of the main regression model, and the regression results are shown in column (1) of Table 7.The coefficient of the interaction term is 0.038, and is significant at the level of 5%, so the research conclusion of this paper is still valid.Based on Jiang et al. (2008) and Sheng et al. (2012), this paper replaced the explained variable and used the asset-liability ratio Lev2 as the proxy variable of capital structure to conduct the regression again.The empirical test results are shown in column (2) of Table 7.The results show that the coefficient of the interaction term is 0.037, and is significant at the 5% level, which indicates that the previous conclusion is also supported after replacing the capital structure measurement method.

Propensity score matching test
In this paper, the propensity score matching method is used to test the robustness.The matching method is to carry out one-to-three matching in the nearest way on the samples of listed companies with related finance companies from the samples of listed companies without related finance companies according to the 8 indicators to estimate the target capital structure such as company size (SIZE) and profitability (ROA), and 6585 paired samples are finally obtained.The balance test of propensity score matching is used, and the results are shown in Panel A of Table 8.As can be seen, the absolute values of standard deviations of all matched variables are below 10%, and after matching, none of the variables are significantly different between the experimental group and the control group.Subsequently, the samples after PSM are regressed, and the results are shown in Panel B of Table 8.First of all, only the interaction term, the lag phase of the interestbearing liability LEV and the dummy variable FINANCE of the finance company are added into column (1).After regression, it is found that the coefficient of the interaction term is 0.024, and it is significant at the level of 5%, which preliminarily verifies the inhibitory effect of group finance companies on the dynamic adjustment of the capital structure of listed companies.All control variables of the model ( 4) are added in the column (2), the regression result shows that the coefficient of the interaction term is 0.025, and it is significant at the level of 5%.That indicates the sample after the PSM also shows that finance companies have significant inhibitory effect on the dynamic adjustment of capital structure of listed companies, once again verified the previous research hypothesis.In addition, from the results of the balance test, although the difference of variable CF was not significant in the experimental group and the control group before and after matching, the standard deviation increased after matching.In order to make the results of PSM more robust, this paper used seven control variables except variable CF as covariates to repair.This conclusion is also supported by regression of the obtained samples, which are not reported here.

Tests based on ownership structure and the related party transactions
Many scholars have found that ownership structure and related party transactions are related to tunnelling behaviour of listed companies, which is tested in this paper.First consider the influence of major shareholders holdings, Bai et al. (2005) found that large shareholders are more likely to have a 'tunnel effect' when their shareholding ratio is low, that is, large shareholders, in order to safeguard their own private interests, tunnel listed companies and encroach on the interests of minority shareholders.However, when the shareholding ratio of major shareholders is high, the interests of major shareholders will converge with those of listed companies, and this 'incentive alignment effect' will weaken the 'tunnel effect' and reduce the encroachment behaviour of major shareholders.Jensen and Meckling (1976) and believed that when the shareholding ratio of the largest shareholder changed from low to high, the tunnelling behaviour of the largest shareholder would change from the initial entrenchment defending effect to the later incentive alignment effect.This paper predicts that when the shareholding ratio of the largest shareholder is low, the inhibitory effect of finance companies may be more obvious.In order to verify this point, the whole sample is divided into the group with high shareholding ratio of the largest shareholder and the group with low shareholding ratio of the largest shareholder according to the median of the largest shareholder's shareholding ratio in the same year and industry.At the same time, regression was conducted on the groups of the two subsamples, and the empirical test results are shown in column ( 1) and (2) of Table 9.
The regression results show that the inhibitory effect of finance companies on the dynamic adjustment of the capital structure of listed companies is insignificant when the shareholding ratio of the largest shareholder is high, while the coefficient of the interaction term is 0.051 when the shareholding ratio of the largest shareholder is low, and it is significant at the level of 1%, indicating that when the shareholding ratio of the largest shareholder is low, the finance company has a significant inhibitory effect on the dynamic adjustment of the capital structure of listed companies.
In countries with poor investor protection, related party transactions often become a tool for controlling shareholders to tunnel listed companies (Johnson et al., 2000).H. H. Zhang et al. (2016) also believe that related party transactions, especially unfair related party transactions, have become an important 'withdrawal method' for major shareholders.This paper believes that the inhibition of finance companies on the dynamic adjustment of capital structure of listed companies may originate from the tunnelling behaviour of controlling shareholders.When more related transactions occur in listed companies, it indicates that the listed companies may have more serious tunnelling behaviour, which may be observed that their dynamic adjustment of capital structure has been more significantly inhibited.Therefore, this paper uses the related transaction amount to conduct group test.First, the related transaction amount is divided by the operating revenue, and then the obtained value is divided into high and low groups according to the median of the obtain value in the same year and industry for empirical test.
Column (3) of Table 9 shows that the coefficient of the interaction term is 0.062 in the subsample of high related transactions, which is significant at 1% level.And column (4) shows that the coefficient of the interaction term is 0.039 in the subsample of low related transactions, which is significant at 1% level.The coefficient difference test shows that there is a significant difference in the interaction term of the two subsamples, that is, the dynamic adjustment of the capital structure of listed companies is more significantly inhibited in the subsamples of high related party transactions, which verifies the above analysis.

Tests based on deleveraging policy
On 24 December 2015, the Central Economic Work Conference put forward 'deleveraging' for the first time and took it as the focus of supply-side structural reform.In 2016, The State Council issued <the Opinions of the State Council on Actively and Steadily Reducing the Company Leverage Ratio>.In 2018 and 2019, the State issued <the Key Points of Reducing the Company Leverage>.Further deleveraging efforts have been deployed.The highly leveraged business model adopted by some companies has a great risk of high debt, which is not conducive to the benign development of the market.The deleveraging policy introduced by the government is precisely to suppress this phenomenon and promote the stable and orderly development of the market.Therefore, when the deleveraging policy is promulgated, it may have an impact on the inhibitory effect of finance companies on the dynamic adjustment of the capital structure of listed companies.
This paper conducts an empirical test.Since the deleveraging policy was first proposed at the end of 2015, and it was observed that the interest-bearing debt ratio declined significantly from 2015 to 2016, this paper divided the whole sample into two subsamples according to 2015 as the benchmark: before and after the implementation of the deleveraging policy, and 2015 and before as the subsample before the implementation, the year 2016 and later is the subsample after implementation.The empirical test results are shown in Table 10.
Column (1) of Table 10 shows that the coefficient of the interaction term is 0.039, which is significant at the level of 1%.Column (2) shows that the coefficient of the interaction term is insignificant, indicating that the deleveraging policy has effectively alleviated the inhibitory effect of finance companies on the dynamic adjustment of the capital structure of listed companies.

Tests based on distinguishing the direction of adjustment
This paper argues that controlling shareholders have an incentive to occupy the deposits of listed companies through related finance companies, which will weaken the dynamic adjustment ability of capital structure of listed companies.First, the dynamic adjustment of capital structure is divided into upward adjustment and downward adjustment.When need to be adjusted upward capital structure of listed companies, which need debt funds to meet the need of management production, because their funds are occupied by the finance company, in order to meet their demand for funds, listed companies are forced to get high interest loans from other sources such as external, leading to greater financial pressure, resulting in the ability of upward adjustment of capital structure of listed companies are weakened, It restrains the upward adjustment of the capital structure of listed companies.When need a downward adjustment of capital structure of listed companies, for companies, the most direct way is to repay the loan, however, when the related deposits deposited by the listed company in the finance company are occupied, the company may not have excess funds to repay the loan, resulting in that the listed company cannot adjust its capital structure downward as expected, thus inhibiting the downward adjustment of the capital structure of the listed company.To sum up, finance companies may inhibit the upward and downward adjustment of capital structure of listed companies.In order to verify the above analysis, this paper divides the whole sample into upward adjusted subsample and downward adjusted subsample according to the target capital structure, and conducts regression on model (4) respectively.The empirical test results are shown in Table 11.Column (1) shows that the coefficient of the interaction term in the upward adjustment subsample is 0.079, which is significant at the level of 1%, indicating that finance companies will indeed inhibit the upward adjustment of capital structure of listed companies.Column (2) shows that the coefficient of the interaction term in the subsample of downward adjustment is 0.035, and it is significant at the level of 5%, indicating that finance companies will inhibit the downward adjustment of capital structure of listed companies.

Tests based on the degree of deviation
The dynamic adjustment of capital structure includes two aspects: the speed of dynamic adjustment of capital structure and the degree of deviation.The speed of adjustment is the process, while the degree of deviation is the result.In order to show the influence of finance companies on the dynamic adjustment of the capital structure categories, including: Fund collection function, loan business function, entrusted business function, fund settlement function and guarantee business function, to study the impact of specific functions of finance companies on the capital structure adjustment of listed companies.In this paper, the capital concentration of finance companies is used to measure the capital collection function, which is defined as variable ZJGJ.Ln (loan business amount plus 1) is used to measure the loan business function, which is defined as variable DK.Ln (entrusted business amount plus 1) is used to measure the entrusted business function, which is defined as the variable WT.Ln (fund settlement amount plus 1) is used to measure the fund settlement function, which is defined as variable ZJJS.Ln (guarantee service amount plus 1) is used to measure the guarantee service function, which is defined as variable DB.The higher the value of the above five functions, the better the function is performed.
The above data are all from the Yearbook of Chinese Business group Finance Companies.Since the specific business function data of the Yearbook of Chinese Business group Finance Companies are only disclosed up to 2016, the data sample in this section is up to 2016.Firstly, the five functional variables are respectively multiplied with LEV i,t-1 to generate the interaction terms ZJGJ i,t * LEV i,t-1 、DK i,t * LEV i,t-1 、WT i,t * LEV i,t-1 、ZJJS i,t * LEV i,t-1 and DB i,t * LEV i,t-1 .If the interaction term is significantly positive, it proves that this function plays an inhibitory role in the dynamic adjustment of the capital structure of listed companies.The empirical results are shown in Table 13.

Conclusions
Based on the data of all A-share listed companies from 2009 to 2018, this paper empirically tests the impact of the existence of group finance companies on the dynamic adjustment of capital structure of listed companies.The research found that the group finance company will inhibit the dynamic adjustment of the capital structure of listed companies, and the inhibition effect may be derived from the controlling shareholders' occupation of the deposits of listed companies through the finance company, which affects the freedom of listed companies to master capital, thereby inhibiting the dynamic adjustment of the capital structure of listed companies.
Further research shows that when the shareholding ratio of controlling shareholders is low and the related party transactions are high, the inhibitory effect of group finance companies is more significant.In addition, this paper also finds that the deleveraging policy helps to promote listed companies to adjust to the optimal capital structure and weaken the inhibition of group finance companies.In addition, the inhibition of finance companies is significant in both upward and downward adjustment processes.
We also find that finance companies will make the deviation of capital structure of listed companies larger, and this effect is mainly reflected in upward deviation.We also find that the functions of finance companies will affect the dynamic adjustment of capital structure of listed companies.The research of this paper enriches the literature in the field of dynamic adjustment of capital structure, and shows another important factor affecting the dynamic adjustment of capital structure of listed companies from the new perspective of controlling shareholders' tunnelling of listed companies through related finance companies, and has certain practical guiding significance.First, for listed companies, the establishment of finance companies to build internal capital markets may play an effective role to a certain extent, but we should be wary of finance companies becoming controlling shareholders to tunnel listed companies.When it is necessary for the listed company to establish a finance company, it should strengthen corporate governance and try to avoid or reduce the tunnelling behaviour of the controlling shareholder.Second, at the national level, the effect of deleveraging policy implementation has been reflected in promoting the optimisation of the capital structure of listed companies.Relevant departments should formulate more specific and perfect deleveraging policies to make efforts for the further benign development of the capital market.

Table 1 .
Definition of main variables.The mean value of variable DEPOSIT is 0.073, indicating that about 7.3% of listed companies in the sample of this paper have related deposits in finance companies, and about 65.2% (0.073/0.112) of listed companies have related deposits in the sample of listed companies with related finance companies.
TANG Tangibility of assets, (net fixed assets + inventories)/total assets GROWTH Growth, operating revenue growth rate MEAN Industry asset-liability ratio average CF Net cash flow from operating activities/operating income AGE Age of company, Year of year -year of establishment of the company DEP (Depreciation of fixed assets + amortisation of intangible assets)/Total assets this stage is small.

Table 3 .
Correlation coefficients of variables.

Table 4 .
Finance company and dynamic adjustment of capital structure.

Table 5 .
Related deposits and dynamic adjustment of capital structure.

Table 7 .
Controls for firm and year fixed effects and replace the explained variables.

Table 9 .
Shareholding ratio of controlling shareholder and related party transaction.