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Determinants of the capital structure of Chinese non-listed enterprises: Is TFP efficient?

Dongyang Zhang and Deqiang Liu

Economic Systems, 2017, vol. 41, issue 2, 179-202

Abstract: This paper investigates the relationship between TFP (Total Factor Productivity) and leverage measures (total, short-term and long-term leverage) of Chinese non-listed firms during the period 1999–2007. First, TFP is significantly and positively associated with the three leverage measures of private and foreign owned enterprises, but insignificantly correlated with state-owned enterprises. Second, financial constraints, leverage costs, and the institutional environment can affect the relation between TFP and leverage; this relation tends to be much stronger when enterprises face stronger financial constraints, higher leverage costs, and an underdeveloped institutional environment. Third, we show that TFP also plays a significant and positive role on formal and informal leverage. Our research offers new evidence that TFP is an important determinant of capital structure choices.

Keywords: Capital structure; Tfp; Financial constraints; Institutional structure; Cost of debt; Chinese non-listed firms (search for similar items in EconPapers)
JEL-codes: G18 G32 (search for similar items in EconPapers)
Date: 2017
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