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Analysis of capital structure stability of listed firms in China

Analysis of capital structure stability of listed firms in China The purpose of this paper is to analyze the corporate capital structure stability of listed firms in China during the period 1990–2013.Design/methodology/approachThe study uses panel data from a sample of 716 firms that have been listed in China for at least 15 years. A fixed-effects panel data regression model with time effects is used in the estimation.FindingsThe findings show that size, profitability and investment opportunities have a significant influence on capital structure, whereas the tangibility of assets is not found to be significant. Few industries show significance in explaining differences and variation in leverage ratios.Social implicationsIt is recommended by this study that corporate managers of listed firms in China should consider leverage ratios variation while choosing the capital structure.Originality/valueThis study can be helpful in assisting companies to make financing decisions and setting up strategies relevant in their growth and profitability. The study will also have a significant assistance to bring to light corporate issues to policy makers, especially in the areas of both equity and debt financing, particularly the bond market. To the society, this study will show the nature of Chinese-listed companies, and it can assist individual investors in making decisions regarding companies in which they hold investments and in making meaningful comparisons with other companies. The paper also aims at contributing to the existing literature on the empirical study on capital structure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

Analysis of capital structure stability of listed firms in China

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2044-1398
DOI
10.1108/cfri-05-2018-0044
Publisher site
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Abstract

The purpose of this paper is to analyze the corporate capital structure stability of listed firms in China during the period 1990–2013.Design/methodology/approachThe study uses panel data from a sample of 716 firms that have been listed in China for at least 15 years. A fixed-effects panel data regression model with time effects is used in the estimation.FindingsThe findings show that size, profitability and investment opportunities have a significant influence on capital structure, whereas the tangibility of assets is not found to be significant. Few industries show significance in explaining differences and variation in leverage ratios.Social implicationsIt is recommended by this study that corporate managers of listed firms in China should consider leverage ratios variation while choosing the capital structure.Originality/valueThis study can be helpful in assisting companies to make financing decisions and setting up strategies relevant in their growth and profitability. The study will also have a significant assistance to bring to light corporate issues to policy makers, especially in the areas of both equity and debt financing, particularly the bond market. To the society, this study will show the nature of Chinese-listed companies, and it can assist individual investors in making decisions regarding companies in which they hold investments and in making meaningful comparisons with other companies. The paper also aims at contributing to the existing literature on the empirical study on capital structure.

Journal

China Finance Review International – Emerald Publishing

Published: Mar 23, 2020

Keywords: Panel data; Capital structure; Chinese-listed firms; C50; C33; F21; O38; O55

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