This paper examines the effect of state control and ownership structure on leverage decision of firms listed in Chinese stock market. Our results show that state-owned enterprises (SOEs) have higher leverage ratios than non-SOEs, and SOEs in regions with a poorer institutional environment have...

Market imperfections such as taxes, asymmetric information and agency problems make capital structure decisions relevant to the value of the firm. More specially, the agency theory suggests that debt financing is one of the governance mechanisms to mitigate agency costs of equity capital and...