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The effect of ownership structure on leverage decision: new evidence from Chinese listed firms

Author

Listed:
  • Qigui Liu
  • Gary Tian
  • Xiaoming Wang

Abstract

This paper examines the effect of state control and ownership structure on the leverage decision of firms listed in the 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 higher leverage ratios than SOEs in better regions. We also show that the largest shareholding (the percentage of shares held by the largest shareholder) in the SOEs has a negative relationship with the leverage ratio, while the largest shareholding in non-SOEs has a non-linear relationship with the short-term and long-term debt ratios. Finally, this study also shows that the share split reform and the improvement of institutional environment both weaken the negative relationship and strengthen the positive relationship between largest shareholding and leverage of SOEs and non-SOEs to some extent. This paper documents how the financing behaviour of SOEs is more influenced by government intervention, while the financing behaviour of non-SOEs is more market oriented.

Suggested Citation

  • Qigui Liu & Gary Tian & Xiaoming Wang, 2011. "The effect of ownership structure on leverage decision: new evidence from Chinese listed firms," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(2), pages 254-276.
    • Handle: RePEc:taf:rjapxx:v:16:y:2011:i:2:p:254-276
    DOI: 10.1080/13547860.2011.564755
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    1. Rajan, Raghuram & Zingales, Luigi, 2003. "Banks and Markets: the Changing Character of European Finance," CEPR Discussion Papers 3865, Centre for Economic Policy Research.
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    1. Su, Kun, 2015. "The inner structure of pyramid and capital structure: Evidence from China," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 9, pages 1-30.
    2. Xiaohong Liu & Liguo Zhou & Yen-Chun Jim Wu, 2015. "Supply Chain Finance in China: Business Innovation and Theory Development," Sustainability, MDPI, vol. 7(11), pages 1-21, November.
    3. Dawood Ashraf & Mohsin Khawaja & M. Ishaq Bhatti, 2022. "Raising capital amid economic policy uncertainty: an empirical investigation," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-32, December.
    4. Oleksandr Talavera & Shuxing Yin & Mao Zhang, 2022. "Political motives of excess leverage in state-owned firms," Discussion Papers 22-04, Department of Economics, University of Birmingham.
    5. Huang, Yuxin & Mukherjee, Tarun & Wang, Wei, 2024. "Labor protection and financing decisions of firms: The case of China," International Review of Economics & Finance, Elsevier, vol. 94(C).
    6. Wu, Wenxin & Zhang, Xuezhi & Zhou, Zixun, 2022. "Institutional investors' corporate site visits and pay-performance sensitivity," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    7. Helmi A. Boshnak, 2025. "The impact of corporate governance and ownership structure on the capital structure decisions of Saudi listed firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 29(2), pages 543-572, June.
    8. S. Ramakrishna Velamuri & Shiqi Zhang & Sonal H. Singh, 2025. "Driving Innovation: Exploring the Interplay of Family Ownership, State Ownership and Management Control," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 34(4), pages 836-880, November.
    9. Mohamed Galal Abobakr & Khairy Elgiziry, 2016. "The Effects of Board Characteristics and Ownership Structure on the Corporate Financial Leverage," Accounting and Finance Research, Sciedu Press, vol. 5(1), pages 1-1, February.
    10. Ho Dinh Phi & Ngoc Nguyen Bich & Tung Tran Van & Minh Bui Quang, 2021. "Relationship between Management Accounting and Business Efficiency - the Intermediate Role of Management Efficiency: A Case Study of Small and Medium Enterprises in the Mekong Delta, Vietnam," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(4), pages 163-174, 12-2021.
    11. Khawaja, Mohsin & Bhatti, M. Ishaq & Ashraf, Dawood, 2019. "Ownership and control in a double decision framework for raising capital," Emerging Markets Review, Elsevier, vol. 41(C).
    12. Tan, Yong & Walheer, Barnabé, 2024. "Stability and economic performances in the banking industry: The case of China," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 326-345.
    13. Swanpitak, Tanapond & Pan, Xiaofei & Suardi, Sandy, 2020. "The value of family control during political uncertainty: Evidence from Thailand's constitutional change in 201411We are grateful for helpful comments and suggestions provided by Shu-Ching Chou, Woochan Kim, Nicolas Eugster, Yu-Shan Wei and participa," Emerging Markets Review, Elsevier, vol. 44(C).
    14. Su, Kun, 2014. "The inner structure of pyramid and capital structure: Evidence from China," Economics Discussion Papers 2014-5, Kiel Institute for the World Economy.
    15. Haijing Liu & Hyunah Lee, 2024. "The Role of Ownership Structure in the Relationship Between Environmental, Social, and Governance Practices and Financial Reporting Quality: Evidence from China," Sustainability, MDPI, vol. 16(23), pages 1-21, December.
    16. Anas Azenzoul & Nacer Mahouat & Khalil Mokhlis & Abdellatif Moussaid, 2025. "Digital Transformation and Corporate Tax Avoidance: Evidence from Moroccan Listed Firms," JRFM, MDPI, vol. 18(10), pages 1-22, October.
    17. 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.

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