This paper studies the relationship between local government intervention and leverages ratio of local SOEs based on the background of government intervention heterogeneity in different regions in China and samples of public local SOEs from 1998 to 2007.The research finds that local government intervention is positively correlated with leverage ratio of local SOEs and this relationship is more notable in regions with higher level of government intervention.The above empirical studies indicate that in transition countries such as China,the government acts as an important interest-related institution to influence on firms' decisions.Firms can raise leverage ratio in order to enhance bargaining power with the government and resist loss from government interventions.
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