An Empirical Study on Determinants of Capital Structure in Chinese Listed Companies

This paper gives an empirical study on determinants of capital structure of Chinese-listed companies using firm-level panel data. The study employs a new database containing the accounting data from 89 non-financial companies listed on the Shanghai and Shenzhen Stock Exchange during the period time of 2003 to 2005. It employs six index variables as independent variables, and finds main affecting factors by multiple regression analysis. It is concluded that the long-term debt ratio positively correlated with tangibility and growth opportunities, however, the size, profitability and non-debt tax shield have a negative impact on the long-term debt ratio. Overall, most results of this study are consistent with the propositions that based on the research about other countries, which implies that the Chinese listed firms have followed the basic rules of global economy despite the state controlling ownership. Another empirical finding shows that Chinese firms tend to have lower long-term debt compare with other countries.