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Institutional Environment and Capital Structure: Evidence from Private Listed Enterprises in China

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  • Hongbo Duan
  • Abdul Razak bin Chik
  • Chonjun Liu

Abstract

With the rapid development of modern market economy, in order to safeguard the comprehensive competitiveness, enterprises adjust their capital structure based on the external and internal environment. In the selection of enterprises¡¯ financing policies, especially the debt decisions, the macroeconomic condition will be an important factor (Korajczyk and Leny). Studies suggest that macroeconomic condition has great impact on the pace and scale of the capital structure adjustment and the companies¡¯ liabilities (Dirk Hackbarth ect. 2006; Douglas O, Cook and Tian Tang, 2009). The capital structure determines structures of long-term debts and equity capital. The analysis on debt structure and benefits and risks of enterprises is of great importance to maximize the value of enterprises. On the basis of introducing the development of the capital structure theory, this article investigate an important issue in the area of financial economics by analyzing the main factors affecting capital structure and focusing on system environment which has not been fully studied. This article employed empirical method to analyze data of private enterprises in different areas during 2007-2009 which had been listed in Shanghai and Shenzhen stock exchange markets. The conclusion is that changes of the following five factors, government intervention degree, non-state-owned economic structure, market structure, financial structure of commercialization combine with legal system, have great impacts on the capital structure and the development of private enterprises.

Suggested Citation

  • Hongbo Duan & Abdul Razak bin Chik & Chonjun Liu, 2012. "Institutional Environment and Capital Structure: Evidence from Private Listed Enterprises in China," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(1), pages 15-21, January.
    • Handle: RePEc:jfr:ijfr11:v:3:y:2012:i:1:p:15-21
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    References listed on IDEAS

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    1. Yang, Xiaolou, 2011. "Trade credit versus bank credit: Evidence from corporate inventory financing," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 419-434.
    2. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
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    2. Masiak, Christian & Moritz, Alexandra & Lang, Frank, 2017. "Financing Patterns of European SMEs Revisited: An Updated Empirical Taxonomy and Determinants of SME Financing Clusters," EIF Working Paper Series 2017/40, European Investment Fund (EIF).
    3. Natalia Mokhova & Marek Zinecker, 2013. "The determinants of capital structure: the evidence from the European Union," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(7), pages 2533-2546.
    4. Galina Viktorovna Morozova & Irina Dmitrievna Porfireva, 2021. "Features of Information Coverage of Regional Environmental Policy on the Instance of the Republic of Tatarstan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 210-218, April.
    5. Chu Wang & Char-Lee Lok & Lian Kee Phua, 2023. "Ownership Structure and Capital Structure: Moderating Effect of Product Market Maturity," SAGE Open, , vol. 13(4), pages 21582440231, December.
    6. Valeriya Valer’evna Metel’skaya, 2021. "Correlation-and-regression analysis of the influence of macroeconomic factors on capital structure of Russian corporations under crisis conditions," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-34, December.

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