The Effect of Ownership Structure on Leverage Decision: New Evidence from Chinese Listed Firms

Journal of the Asia Pacific Economy, Vol. 16, No. 2, 2011

24 Pages Posted: 11 Sep 2014

See all articles by Qigui Liu

Qigui Liu

Department of Finance and Accounting, School of Management, Zhejiang University

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Macquarie Business School

Xiaoming Wang

Shanghai University of Finance and Economics

Date Written: 2011

Abstract

This paper examines the effect of state control and ownership structure on leverage decision of firms listed in Chinese stock market. Our results show that state-owned enterprises (SOEs) have higher leverage ratios than non-SOEs, and SOEs in regions with a poorer institutional environment have higher leverage ratios than SOEs in better regions. We also show that the largest shareholding (percentage of shares held by the large shareholder) in the SOEs has a negative relationship with the leverage ratio, while largest shareholding in Non-SOEs has a non-linear relationship with short-term and long-term debt ratio. Finally, this study also shows that share split reform and the improvement of institutional environment both weaken the negative relationship and strengthens the positive relationship between largest shareholding and leverage of SOEs and Non-SOEs to some extent. This paper documents how the financing behaviour of SOEs is more influenced by government intervention, while the financing behaviour of non-SOEs is more market oriented.

Keywords: capital structure; ownership structure; state ownership; largest shareholding; regional institutional development

JEL Classification: G30, G32

Suggested Citation

Liu, Qigui and Tian, Gary Gang and Wang, Xiaoming, The Effect of Ownership Structure on Leverage Decision: New Evidence from Chinese Listed Firms (2011). Journal of the Asia Pacific Economy, Vol. 16, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=2493999

Qigui Liu

Department of Finance and Accounting, School of Management, Zhejiang University ( email )

Hangzhou, Zhejiang Province 310058
China

Gary Gang Tian (Contact Author)

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Xiaoming Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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