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Determinants of Financial Sustainability in Chinese Firms: A Quantile Regression Approach


  • Li Zhao

    (Department of Accounting, Business School, Yango University, Fuzhou 350015, China)

  • Zhengqiao Liu

    (Digital Industry Research Institute of Digital Economy Academy, Yango University, Fuzhou 350015, China)

  • Thi Huong Giang Vuong

    (Department of Finance, Banking University of Ho Chi Minh, Ho Chi Minh 70000, Vietnam)

  • Huu Manh Nguyen

    (Department of Accounting and Finance, Nha Trang University, Nha Trang 57000, Vietnam)

  • Florin Radu

    (Faculty of Economics, Valahia University of Targoviste, Str. Aleea Sinaia, nr. 13, 130024 Targoviste, Romania)

  • Alina Iuliana Tăbîrcă

    (Faculty of Economics, Valahia University of Targoviste, Str. Aleea Sinaia, nr. 13, 130024 Targoviste, Romania)

  • Yang-Che Wu

    (Department of Finance, College of Finance, Feng Chia University, Taichung City 40724, Taiwan)


Our research investigates the connection between firm characteristics and leverage based on a sample of firms listed in the Chinese Stock Index 300. We aim to examine the sustainability of the financial structure of Chinese enterprises covering the period 2010–2019. We employ a conditional quantile regression that discloses the behavior of regressions across the leverage distribution and compares its results for different leverage levels with those achieved by the linear regression model. The results confirm the effects of the determinants of capital structure change since the quantile of leverage varies. We find that both the trade-off theory (TOT) and the pecking order theory (POT) confirm the validity of Chinese firms’ financing decisions at different quantiles of leverage. Specifically, the empirical results support the POT more over the TOT at higher levels of the quantile. Furthermore, the relationship between firm size and leverage strongly switches to support the POT at the highest quantile. All empirical results are obtained from quantile regression, consistent with the prediction for an increase in asymmetric information of the POT when Chinese firms employ more debt in their capital structure.

Suggested Citation

  • Li Zhao & Zhengqiao Liu & Thi Huong Giang Vuong & Huu Manh Nguyen & Florin Radu & Alina Iuliana Tăbîrcă & Yang-Che Wu, 2022. "Determinants of Financial Sustainability in Chinese Firms: A Quantile Regression Approach," Sustainability, MDPI, vol. 14(3), pages 1-18, January.
  • Handle: RePEc:gam:jsusta:v:14:y:2022:i:3:p:1555-:d:737133

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    References listed on IDEAS

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    Cited by:

    1. Hueh-Chen Lin & Jiang-Chuan Huang & Chun-Fan You, 2022. "Bank Diversification and Financial Constraints on Firm Investment Decisions in a Bank-Based Financial System," Sustainability, MDPI, vol. 14(17), pages 1-19, September.
    2. Aleksandra Stoiljković & Slavica Tomić & Bojan Leković & Milenko Matić, 2022. "Determinants of Capital Structure: Empirical Evidence of Manufacturing Companies in the Republic of Serbia," Sustainability, MDPI, vol. 15(1), pages 1-19, December.

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