Ownership, Institutions, and Capital Structure: Evidence from Chinese Firms

摘要

We employ a new firm-level data set to study the capital structure and debt maturity choices of Chinese firms. We show that ownership and governance structures exert strong influences on individual firms’ financing decisions. Specifically, leverage increases with state and private ownership, and decreases with foreign ownership. State ownership is associated with firms’ increased access to long-term debt. The disparities in regional institutional development matter. Firms in regions with more competitive banking sectors and better legal environments have lower total debt relative to assets. Large and fast-growing regional economies are associated with more, often shortterm, borrowing by local firms; and large economies increase local firms’ access to long-term debt. The combination of ownership and institutional factors explains up to seven percent of the total variation in firms’ leverage decisions, while the firm characteristics alone explain no more than thirteen percent of the variation. Ownership structures and institutional environments affect large and small firms differently, and our evidence suggests that small firms are more likely to be squeezed out of the long-term loan market.