Institutions, Ownership Structure and Financing Decisions: Evidence from Chinese Listed Firms

摘要

This paper empirically investigates the determinants of financing decisions in Chinese listed firms, using 3,196 firm-year observations from the Shanghai Stock Exchange during the period 2001–2005. Thereby, we investigate the effects of differences in institutions across Chinese provinces and municipalities, and compare the financing choices of state-controlled and private-controlled enterprises. We find that a better legal environment negatively affects the debt ratio and the proportion of debt that consists of bank loans in SOEs as well as private enterprises. Conversely, regional banking development positively influences these two variables. If anything, these effects of the rule of law and regional banking development on leverage are stronger for private-controlled firms. SOEs have lower debt ratios in regions with better stock market access, while private firms rely less on bank loans in regions with more government intervention in business. Finally, we document that SOE bank loans have a longer maturity, while their overall debt ratio and debt mix are comparable to those of private firms.