The Practical Applicability of Capital Structure Theories: A Comparative Study of Jd.com and Alibaba Group

This paper explores the real-world applicability of capital structure theories by comparing two representative Chinese firms: JD.com and Alibaba. Using financial indicators and theoretical alignment, the study examines how the Trade-off Theory and Pecking Order Theory explain each firms financial behavior under varying corporate conditions. The comparative analysis focuses on debt structure, interest coverage, cash flow patterns, and governance models. Findings show that JD.coms stable cash flow, asset intensity, and centralized governance align with the Trade-off Theory, while Alibaba's strong internal cash flow, asset-light operations, and sensitivity to control dilution reflect the logic of the Pecking Order Theory. These results highlight that capital structure decisions are highly context-specific and must correspond to a firms financial profile, risk tolerance, and strategic priorities. The study emphasizes that no single capital structure theory is universally applicable; rather, firms should adopt a contextual approach that balances cost efficiency with organizational stability. These insights contribute to a more nuanced understanding of corporate financing strategy and offer practical guidance for companies facing diverse financial and governance environments.