In this article， using mathematical deduction， we deduce the driving effect of capital structure fluctuation on firm financial distress and the relation among interest rate liberalization， capital structure fluctuation and firm financial distress. Using 2002—2013 financial data of A share listed companies， we check the theoretical deductions of our research. We draw the following conclusions： high capital structure fluctuation leads to high probability of financial distress， rapid interest rate liberalization restrains capital structure fluctuation， thus alleviating the driving force of capital structure fluctuation on the firm financial distress. Further study finds that the liberalization of interest rate formulation and the expansion of interest rate float limit distinctly affect the driving force of capital structure fluctuation on firm financial distress， while the bench mark interest rate formulation has a little impact on the effect of capital structure fluctuation on firm financial distress.