Government Ownership and the Capital Structure of Firms: Analysis of An Institutional Context from China

Published in China Journal of Accounting Research, Volume 11, Issue 3, September 2018, Pages 171-185. DOI: 10.1016/j.cjar.2018.07.001

Posted: 4 Jun 2019

See all articles by Xiaohong Huang

Xiaohong Huang

University of Twente - Department of Finance & Accounting

Rezaul Kabir

University of Twente - Department of Finance and Accounting

Lingling Zhang

affiliation not provided to SSRN

Date Written: August 1, 2018

Abstract

Emerging economies provide interesting scenarios for examining how institutional context influences the financing behavior of firms. In this study, we examine the capital structure of Chinese listed firms following the Split-Share Structure Reform of 2005. This reform allowed a reduction of government ownership by making government shares tradable. We find that the impact of government ownership on leverage is dependent on whether the government is the largest shareholder in a firm and whether the government ownership is through a parent state-owned enterprise. In addition, we document that the largest non-government shareholder positively influences leverage. Overall, our results reveal that the largest controlling shareholder, either government or non-government, has a significant impact on the capital structure of Chinese firms.

Keywords: Capital structure, Leverage, Ownership, Government ownership, China

JEL Classification: G34

Suggested Citation

Huang, Xiaohong and Kabir, Rezaul and Zhang, Lingling, Government Ownership and the Capital Structure of Firms: Analysis of An Institutional Context from China (August 1, 2018). Published in China Journal of Accounting Research, Volume 11, Issue 3, September 2018, Pages 171-185. DOI: 10.1016/j.cjar.2018.07.001. Available at SSRN: https://ssrn.com/abstract=3389400

Xiaohong Huang

University of Twente - Department of Finance & Accounting ( email )

P.O.Box 217
7500 AE Enschede
Netherlands

Rezaul Kabir (Contact Author)

University of Twente - Department of Finance and Accounting ( email )

Faculty of Behavioral, Management & Social Science
P. O. Box 217
Enschede, 7500 AE
Netherlands
+31 53 489 4512 (Phone)
+31 53 489 2159 (Fax)

HOME PAGE: http://https://people.utwente.nl/r.kabir

Lingling Zhang

affiliation not provided to SSRN

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