Ultimate Ownership and Adjustment Speed Toward Target Capital Structures: Evidence from China

Ting Zhou and Jun Xie

Emerging Markets Finance and Trade, 2016, vol. 52, issue 8, 1956-1965

Abstract: We investigate whether ultimate ownership affects firms’ adjustment speed toward target capital structures for Chinese publicly listed companies over the period 1999–2009. We divide our sample into state-owned enterprises (SOEs) and non-SOEs according to their ultimate ownership. We find that SOEs have higher leverage ratios and slower adjustment speeds toward target capital structures. Our results are consistent with the trade-off theory, implying that the political resources of SOEs can lead to a higher persistence and slower leverage adjustment speeds in comparison to non-SOEs. Finally, our results also raise a question: Why do Chinese companies adjust their capital structure so fast?

Date: 2016
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DOI: 10.1080/1540496X.2015.1062311

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