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Does Optimal Capital Structure Exist in Chinese Military Enterprises? Evidence from Industrial Heterogeneity

Author

Listed:
  • Chiwei SU

    (School of Business, Wuchang University of Technology, Wuhan, Hubei Province, China.)

  • Kaihua WANG

    (School of Business, Wuchang University of Technology, Wuhan, Hubei Province, China.)

Abstract

This paper aims to discuss the relationship between capital structure and firm performance in different Chinese industries. Depending on panel threshold regression method, different optimal capital structure levels are examined in the air force and naval equipment industries. Firm size, profitability, tangible assets and state-owned shares can explain this phenomenon effectively. Besides, there is no threshold effect for land force equipment industry, which may be due to the military reforms in People’s Liberation Army, industry situation and uncertainties in the surroundings. Overall, this study focuses on Chinese different state-owned defence industry, providing a new perspective suggesting that capital structure theory developed from a Western economic perspective can be applied to present-day China. For the future research perspective, the Chinese private defence industry is a new field which is worthy of discussing.

Suggested Citation

  • Chiwei SU & Kaihua WANG, 2022. "Does Optimal Capital Structure Exist in Chinese Military Enterprises? Evidence from Industrial Heterogeneity," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 128-149, December.
    • Handle: RePEc:rjr:romjef:v::y:2022:i:4:p:128-149
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    More about this item

    Keywords

    capital structure; enterprise performance; military industries; panel unit root; panel threshold regression model;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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