Determinants of capital structure in Chinese listed companies

Abstract

This paper discusses the characteristics of capital structure and examines the determinants of it. The sample includes 3506 Chinese listed companies except for financial companies during the period of 2006-2016, by using multivariate regression analysis in a panel data framework. The result shows that leverage increases with firm size and decreases with profitability. Growth opportunity is related to current liability ratio and total debt-to-asset ratio. However, the impact of growth opportunity on noncurrent liability ratio is not significant. Tangibility is related to short-term debt and long-term debt, but no significant relationship between tangibility and total debt exists. Chinese firms prefer to finance short-term debt. The pecking order theory can explain the result to some extent.