Ultimate Ownership and Adjustment Speed Toward Target Capital Structures: Evidence from China |
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Authors: | Ting Zhou |
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Affiliation: | Department of French Language, School of Foreign Languages and Literature, Wuhan University, Wuhan, China |
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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? |
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Keywords: | adjustment speed capital structure China ultimate ownership |
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