The impact of population aging on capital structure decisions and capital market efficiency: Evidence from China

The worsening of demographic aging has precipitated a discernible scarcity in China's labor force, prompting a pivotal shift in the capital market's factor allocation efficiency and compelling enterprises to recalibrate their capital utilization tactics. Utilizing a dataset of Chinese A-share listed companies spanning 2007 to 2021, this study meticulously examines how aging trends are sculpting corporate capital structure choices and assesses their subsequent ramifications on the efficacy of the capital market. The findings indicate that demographic aging necessitates more frequent capital structure realignments within firms, particularly heightening the dependency on debt financing. This shift mirrors the corporate response to escalating labor costs and market demand dynamics and reshapes the capital market's financing architecture and operational efficiency. Through a nuanced comparative analysis, the study unveils the differential impacts of demographic aging on capital structure adjustments across diverse enterprise categories, highlighting a pronounced effect in labor-intensive sectors and firms with elevated labor costs. The analysis further delineates that non-state-owned enterprises exhibit a more adaptable and proactive stance in their capital structure adjustments in response to aging trends, as opposed to their state-owned counterparts. These insights illuminate the intricate interplay between macro-demographic trends and corporate capital structure decisions, underscoring their profound implications for capital market efficiency.