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Determinants of Capital Structure: The Case of Chinese Technology Firms

In: Regulation of Finance and Accounting

Author

Listed:
  • Mohamad Kaakeh

    (Eastern Mediterranean University)

  • Korhan K. Gokmenoglu

    (Ankara HBV University)

Abstract

This research addresses the effects of firm-specific factors on the formation of capital structure in the case of the Chinese technology sector. Also, it aims to shed light on whether the key drivers of capital structure in China are different from those in western countries. To this aim, we analyzed the annual balanced panel data of 460 companies for the period 2007–2017 by means of the structural equation modeling approach. Empirical findings demonstrated that size, financial cost, liquidity, tangibility, profitability, and nondebt tax shields have a significant impact on the leverage structure of Chinese technology firms. Obtained results provide evidence of partial similarities between western countries and China in the determinants of capital structure. Besides, we detected that both trade-off and pecking order theories partially explain the leverage structure decisions of firms in the Chinese technology sector.

Suggested Citation

  • Mohamad Kaakeh & Korhan K. Gokmenoglu, 2022. "Determinants of Capital Structure: The Case of Chinese Technology Firms," Springer Proceedings in Business and Economics, in: David Procházka (ed.), Regulation of Finance and Accounting, chapter 0, pages 129-141, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-99873-8_10
    DOI: 10.1007/978-3-030-99873-8_10
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