What are the Reliably Important Determinants of Capital Structure in China?

54 Pages Posted: 30 Jan 2014 Last revised: 26 Apr 2014

See all articles by Chun Chang

Chun Chang

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Xin Chen

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Guanmin Liao

Renmin University of China - School of Business

Date Written: January 29, 2014

Abstract

Existing studies disagree over the basic determinants of capital structure in Chinese firms. We identify profitability, industry leverage, asset growth, tangibility, firm size, state control, and the largest shareholding as reliable core factors explaining book leverage. Compared with evidence from the United States and other countries, we identify three new core factors, and observe that the relative importance of four common core factors for Chinese firms is diverse. In particular, the state-control dummy is negatively associated with book leverage, contrary to findings in certain previous studies. Additional tests indicate that such a negative effect of state-control derives primarily from easier access to equity financing.

Keywords: Capital structure, China, Financial constraints, State ownership, Leverage

JEL Classification: G32

Suggested Citation

Chang, Chun and Chen, Xin and Liao, Guanmin, What are the Reliably Important Determinants of Capital Structure in China? (January 29, 2014). Available at SSRN: https://ssrn.com/abstract=2387559 or http://dx.doi.org/10.2139/ssrn.2387559

Chun Chang

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Xin Chen (Contact Author)

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Guanmin Liao

Renmin University of China - School of Business ( email )

No. 59 Zhongguancun Street, Haidian District
Beijing, Beijing 100872
China

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