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What are the reliably important determinants of capital structure in china?

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  • Chang, Chun
  • Chen, Xin
  • Liao, Guanmin

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.

Suggested Citation

  • Chang, Chun & Chen, Xin & Liao, Guanmin, 2014. "What are the reliably important determinants of capital structure in china?," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 87-113.
    • Handle: RePEc:eee:pacfin:v:30:y:2014:i:c:p:87-113
    DOI: 10.1016/j.pacfin.2014.06.001
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    More about this item

    Keywords

    Capital structure; China; Financial constraints; State ownership; Leverage;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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