Does Optimal Capital Structure Exist in Chinese Military Enterprises? Evidence from Industrial Heterogeneity

Chiwei Su () and Kaihua Wang ()
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Chiwei Su: School of Business, Wuchang University of Technology, Wuhan, Hubei Province, China.
Kaihua Wang: School of Business, Wuchang University of Technology, Wuhan, Hubei Province, China.

Journal for Economic Forecasting, 2022, issue 4, 128-149

Abstract: This paper aims to discuss the relationship between capital structure and firm performance in different Chinese industries. Depending on panel threshold regression method, different optimal capital structure levels are examined in the air force and naval equipment industries. Firm size, profitability, tangible assets and state-owned shares can explain this phenomenon effectively. Besides, there is no threshold effect for land force equipment industry, which may be due to the military reforms in People’s Liberation Army, industry situation and uncertainties in the surroundings. Overall, this study focuses on Chinese different state-owned defence industry, providing a new perspective suggesting that capital structure theory developed from a Western economic perspective can be applied to present-day China. For the future research perspective, the Chinese private defence industry is a new field which is worthy of discussing.

Keywords: capital structure; enterprise performance; military industries; panel unit root; panel threshold regression model (search for similar items in EconPapers)
JEL-codes: C33 G32 L25 (search for similar items in EconPapers)
Date: 2022
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