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Analysis of capital structure stability of listed firms in China

Author

Listed:
  • Kelvin Henry Kyissima
  • Gong Zhang Xue
  • Thales Pacific Yapatake Kossele
  • Ahmed Ramadhan Abeid

Abstract

Purpose - 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/approach - The 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. Findings - The 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 implications - It is recommended by this study that corporate managers of listed firms in China should consider leverage ratios variation while choosing the capital structure. Originality/value - This 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.

Suggested Citation

  • Kelvin Henry Kyissima & Gong Zhang Xue & Thales Pacific Yapatake Kossele & Ahmed Ramadhan Abeid, 2019. "Analysis of capital structure stability of listed firms in China," China Finance Review International, Emerald Group Publishing Limited, vol. 10(2), pages 213-228, August.
    • Handle: RePEc:eme:cfripp:cfri-05-2018-0044
    DOI: 10.1108/CFRI-05-2018-0044
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    Citations

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    Cited by:

    1. Dongmin Kong & Ni Qin, 2021. "Does Environmental Regulation Shape Entrepreneurship?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(1), pages 169-196, September.
    2. Kong, Dongmin & Qin, Ni & Xiang, Junyi, 2021. "Minimum wage and entrepreneurship: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 320-336.
    3. Lee, Chien-Chiang & Wang, Chih-Wei, 2022. "Liquidation threat: Behavior of CEO entrenchment," Finance Research Letters, Elsevier, vol. 47(PA).

    More about this item

    Keywords

    Panel data; Capital structure; Chinese-listed firms; C50; C33; F21; O38; O55;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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