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The Determinants Of Capital Structure Choice For Chinese Listed Companies Based On Structural Equation Modeling Approach

Posted on:2011-12-21Degree:MasterType:Thesis
Country:ChinaCandidate:X WangFull Text:PDF
GTID:2189330332967848Subject:Finance
Abstract/Summary:PDF Full Text Request
From the MM theory with the perfect assumptions to the many current studies about capital structure, the issue of corporate capital structure has been the focal problems among the theoretical circle. Although many western scholars have made a lot of presentation to the company's optimal capital structure theory and have theoretically elaborated the factors which contribute to the formation of the optimal corporate capital structures, their empirical analysis on the determinant of capital structure choice is not identical in special institutional environment due to the complexity of the economic structure and the system in different countries. Therefore, combining Chinese actual economical condition and the theory about capital structure to investigate the uniqueness and universality of the determinant of capital structure choice has the univeral guiding sense and role.This paper uses the structural equation modeling (SEM) approach to empirically test the determinants of capital structure choice for Chinese listed firms and manufacturing and not-manufacturing listed companies. We include major factors identified by capital structure theories at home and abroad and construct proxies for these factors with consideration of Chinese specific institutional settings. Our finding suggest that some of the insights from modern finance theory of capital structure are portable to China in that certain firm-specific factors that are relevant for explaining capital structure in developed economies are also relevant in China. Furthermore, the paper indicates that there are some uniqueness of capital structure choice for Chinese-listed firms because of institutional differences and financial constraints in the banking sector. The results also shows: Chinese-listed companies prefer short-term debt financing to long-term debt financing, and the phenomenon also exists in manufacturing and not-manufacturing listed companies; Profitability, asset growth and liquidity are the most significant in all factors that influence the capital structure choice; There are significant differences among the capital structures in manufacturing and not-manufacturing industries; The determinants of capital structure in the two sets of industries are also different; The influencing degree of the same determinant in the two sets of industries is different.
Keywords/Search Tags:Capital structure, Structural Equation Modeling, Growth, Profitability, Liquidity, Industry factor
PDF Full Text Request
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