Determinants Of Chinese Firms' Capital Structure-An International Comparison Approach

The paper employs a new database, which contains more than 280 thousand industrial firms, to research the determinants of Chinese firms'capital structure. Based on the traditional capital structure theory, the paper analyzes the impact of ownership structure and regional difference on leverage. As in other countries, the leverage increases with firm size and fixed asset, and decreases with profitability, risk and non-debt tax shield. Different with the traditional opinion, the paper finds that average effective tax rate reflects the firm's profitability, not tax shield and it negatively correlates with firm's leverage. Among different types of ownership, the state-owned firms have high leverage, compared with low leverage of foreign firms. Also, regional difference has an impact on leverage. The paper introduces two regional indicators: GDP per capita and percentage of different types of ownership. Firms'leverage negatively correlates with GDP per capita. And firms have high leverage in the provinces which have more state-owned firms, and less leverage in the provinces which have more private and foreign firms.