Difang Wan×Xiong Zhang×Dong Fang×Huifen Zhang
Abstract: Dynamic allocation of control rights between managers and investors affects policy of the
dividend and value of enterprise. The paper studied the relevant factors that affect optimal debt ratio
and allocation of control right. We suggest that the enterprise decrease the debt ratio with the increase
of moral hazard, liquidity risk and investors’ absolute risk aversion. With the increase of shareholder’s
control right, the relationship between shareholder’s control right and managers’ moral hazard is
reversed from positive to negative. The implication of the paper is moderate debt ratio may achieve the
tough constraint on the managers’ decision.

Difang Wan
The School of Management Xi’an Jiao Tong University
Xiong Zhang ( )
The School of Management Xi’an Jiao Tong University
Mailbox 2308, Xi’an City, Shannxi Prov. 710049 P.R.China
Email：kantbear18@gmail.com
Dong Fang
The School of Management Xi’an Jiao Tong University
Huifen Zhang
The School of Management Xi’an Jiao Tong University