Ownership, Institutions, and Capital Structure: Evidence from China
By Kai Li, Heng Yue, Longkai Zhao. 2009
461 citations recorded by the source corpus.
We employ a unique data set to explore the role of ownership structure and institutional development in debt financing of non-publicly traded Chinese firms. We show that state ownership is positively associated with leverage and firms' access to long-term debt, while foreign ownership is negatively associated with all measures of leverage. Surprisingly, firms in better developed regions are associated with reduced access to long-term debt, suggesting the availability of alternative financing channels and the tightening of the lending standards under the on-going banking reform. The combination of ownership structures and institutions explains up to 6% of the total variation in firms' leverage decisions, while firm characteristics alone explain no more than 8% of the variation. Further, we show that non-state-owned firms tend to have lower total and short-term debt than their state-owned counterparts in less developed regions. Finally, we show that state-owned firms' easy access to long-term debt is positively associated with long-term investment and negatively associated with firm performance.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/ad1970c0c93ff75e9f89c315808e5c6c96d427b6
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Citations in the corpus
- Family control and corporate cash holdings: Evidence from China (2015, background): “Literature shows that Chinese family firms are discriminated against for accessing external financial resources (Cull and Xu, 2003; Firth et al., 2009; Li et al., 2009; Liu et al., 2013), so connected executives help to overcome this discrimination.”
- National culture and capital structure decisions: Evidence from foreign joint ventures in China (2011, background): “These differences are probably due to the underdeveloped credit markets in China, where other factors, such as political connections and the dominance of state-owned banks, impose additional constraints on foreign joint ventures’ access to debt capital, and long-term debt in particular (Li et al., 2”
- Minority Shareholders’ Control Rights and the Quality of Corporate Decisions in Weak Investor Protection Countries: A Natural Experiment from China (2013, methodology): “14 Following Ai and Norton (2003) and Norton et al. (2004), we also compute the 13 Given the low frequency of equity offering proposals, we also use the Table 2 analysis using a rare event logit model.”
- Corporate governance and firm value during the global financial crisis: Evidence from China (2012, background): “We interpret this to mean that SOEs receive preferential access to bank debt, and as a result, avoid forgoing prospective projects (Li et al., 2009).”
- Institutions, ownership structures, and distress resolution in China☆ (2013, methodology): “The database has increasingly been used for academic research and has been found to have reasonable quality and to be a good representation of the national economy (Chow, 1993; Chuang and Hsu, 2004; Li et al., 2009).”