Ownership, institutions, and capital structure: Evidence from China
We employ a unique data set to explore the role of ownership structure and institutional development in debt financing of non-publicly traded Chinese firms. We show that state ownership is positively associated with leverage and firms' access to long-term debt, while foreign ownership is negatively associated with all measures of leverage. Surprisingly, firms in better developed regions are associated with reduced access to long-term debt, suggesting the availability of alternative financing channels and the tightening of the lending standards under the on-going banking reform. The combination of ownership structures and institutions explains up to 6% of the total variation in firms' leverage decisions, while firm characteristics alone explain no more than 8% of the variation. Further, we show that non-state-owned firms tend to have lower total and short-term debt than their state-owned counterparts in less developed regions. Finally, we show that state-owned firms' easy access to long-term debt is positively associated with long-term investment and negatively associated with firm performance.
Year of publication: |
2009
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Authors: | Li, Kai ; Yue, Heng ; Zhao, Longkai |
Published in: |
Journal of Comparative Economics. - Elsevier, ISSN 0147-5967. - Vol. 37.2009, 3, p. 471-490
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Publisher: |
Elsevier |
Keywords: | Foreign ownership Leverage Long-term debt Marketization Short-term debt State ownership |
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