The Impact Of Regional Corruption On Corporate Capital Structure

Since the well-known MM theory was published by the Modigliani and Miller in 1958,the capital structure has been widely concerned by scholars.The empirical research in this field mainly focuses on two directions.One research is the capital structure with corporate’s value.The other is the determinants of capital structure.At present,the research about the determinants of capital structure,scholars mainly discussed the characteristics of enterprises,industry factors,systems and macroeconomic factors,and few studies focus on the influence of external environment on capital structure.Corruption has been a very common social phenomenon.Since the 18 th CPC National Congress proposed to anti-corruption and build a clean government,corruption has drawn more attention from all circles of society.As an external environment,corruption of government officials will affect the corporate capital structure.On the one hand,corruption will increase the risk that creditors cannot recover their investment,banks will reduce the number of loans or raise credit standards,therefore the enterprises receive the amount of loans from banks will decline.On the other hand,corruption will increase the number of loans from banks through bribing government officials and intervening in bank lending decisions.Therefore,in theory,the relationship between regional corruption and corporate capital structure can not be determined.Under the special institutional background of China’s transition from planned economy to market economy,what is the relationship between regional corruption and corporate capital structure? It is a problem that needs to be discussed in depth at present.Therefore,this paper manually collects the number of corruption cases in each province,autonomous administrative region and municipality from 2003 to 2015,as a measurement index of the degree of corruption in the region.Based on the external environment of enterprises,this paper examines the impact of regional corruption on the corporate capital structure,the empirical results show that there is a nonlinear U-shaped relationship between the regional corruption and the capital structure.That is to say,the asset-liability ratio firstly decreased and then increased with the increase of the regional corruption.Further analysis found that the U-shaped relationship is stronger in the non-state-owned enterprises,growthoriented enterprises and enterprises with cash holdings lower than the interest-bearing assetliability ratio.This paper not only expands the research of developed countries to developing countries,but also enriches the research on the impact of regional corruption on corporate capital structure,and has a certain reference for enterprises to balance the external environment and capital structure decision-making.