State Ownership-Capital Structure Nexus: Empirical Evidence from Chinese Listed Firms

Posted: 10 Dec 2018

See all articles by Xiaochen Jiang

Xiaochen Jiang

University of London - School of Oriental and African Studies (SOAS)

Jim Huangnan Shen

Center for International Development, Harvard Kennedy School, Harvard University

Jun Zhang

Fudan University - China Center for Economic Studies (CCES)

Date Written: November 17, 2018

Abstract

We study the determinants of capital structure, especially the effect of state ownership on corporate debt financing practices in Chinese listed firms from year 2003 to 2015. We employ quantile regression analysis as static model and system GMM as dynamic model to discover whether state ownership variations have significant impact on Chinese listed firms’ capital structure. Evidence shows that increase in state ownership can statistical significantly lead to reduction in firms’ total debt financing and short-term debt financing, but no statistical evidence supports the relationship between state ownership and reduction in long-term debt financing. Our research also found that smaller sized firms can significantly cut down debt financing if there is a boosting in state ownership in the previous period, however, larger firms are positively but statistically insignificantly affected by the variation in state ownership. Our finding suggests that Chinese listed firms, especially smaller firms are likely to reduce excessive short-term debt financing by employing state ownership even in sacrifice of private solvency, despite that state-owned enterprises (SOEs) may demonstrate healthier proportion of debt capital than non-SOEs.

Keywords: State Ownership; Capital Structure; SOE; Debt Financing; Chinese Listed Firms

JEL Classification: G32

Suggested Citation

Jiang, Xiaochen and Shen, Jim Huangnan and Zhang, Jun, State Ownership-Capital Structure Nexus: Empirical Evidence from Chinese Listed Firms (November 17, 2018). Available at SSRN: https://ssrn.com/abstract=3286287 or http://dx.doi.org/10.2139/ssrn.3286287

Xiaochen Jiang (Contact Author)

University of London - School of Oriental and African Studies (SOAS) ( email )

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Jim Huangnan Shen

Center for International Development, Harvard Kennedy School, Harvard University ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Jun Zhang

Fudan University - China Center for Economic Studies (CCES) ( email )

China

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