The Empirical Research Of Capital Structure Of Chinese Listed Corporations

The capital structure choice is a key problem in financial decision in a firm. Since the publication of the value-invariance proposition by Modigliani and Miller, the theories of capital structure become more and more gradually. However, whether these theories suit for our country is our question to study. In recent years, more attention is paid to the empirical study of capital structure in our listed companies. But no literature is contributed to the dynamics in capital structure and its determinants. In our paper, the panel data are used to seek the dynamic nature of capital structure and its determinants for listed companies over 1996 to 2001.The paper begins with a survey of the literature on corporate financial structure to seek some enlightenment of the major determinants of leverage. Then the nature of the capital structure is analyzed and compared with other typical countries including developed countries and developing countries. A fixed effects model is specified based on theories and the nature analysis. The empirical model incorporates cross-sectional and time-series data, i.e. a sample of 288 firms observed annually between 1996 and 2001, and takes into account the influence of both firm-specific and time-specific effects. The dynamics of leverage are also tentatively explored. Finally, interactive time dummy variables are incorporated into the model to highlight the significant relational dynamics in our sample. The results suggest that the capital structures of our listed corporations are different comply from those of developed countries, which imply the relevance of abnormal pecking order. We find some evidence suggesting the importance of asymmetric information theory and agency cost theory in explaining the financing choice of our listed corporations. Debt is correlated significantly with firm size, tangibility, profitability and growth. These relationships change as time. Leverage adjusts slowly to exogenous shocks.