Ultimate Ownership and Adjustment Speed Toward Target Capital Structures: Evidence from China. Issue 8 (2nd August 2016)

• Record Type: Journal Article
• Authors: Zhou, Ting; Xie, Jun
• Is Part Of: Emerging markets finance & trade. Volume 52:Issue 8(2016)
• Page Start: 1956
• Page End: 1965
• Publication Date: 2016-08-02
• Subjects: adjustment speed -- capital structure -- China -- ultimate ownership; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2015.1062311
• Languages: English
• ISSNs: 1540-496X

Abstract

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?