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Leverage and Capital Structure Determinants of Chinese Listed Companies

Ferrarini, Benno and Hinojales, Marthe and Scaramozzino, Pasquale (2017) Leverage and Capital Structure Determinants of Chinese Listed Companies. Manila: Asian Development Bank.

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Abstract

This paper assesses the financial fragility of the Chinese economy by looking at risk factors in the corporate nonfinancial sector. Total debt in the People’s Republic of China has increased significantly in recent years, mostly on account of nonfinancial corporate debt. Earning and the financial performance of corporate firms have weakened, and so has the asset quality of the financial sector. In this paper, quantile regressions are applied to a rich dataset of Chinese listed companies contained in Standard & Poor’s IQ Capital database. We find higher sensitivity over time of corporate leverage to some of its key determinants, particularly for firms at the upper margin of the distribution. In particular, profitability increasingly acts as a curb on corporate leverage. At a time of falling profitability across the Chinese nonfinancial corporate sector, this eases the brake on leverage and may contribute to its continuing increase.

Item Type: Monographs (Working Paper)
Keywords: corporate debt, debt sustainability, panel quantile regression, People’s Republic of China
SOAS Departments & Centres: Faculty of Law and Social Sciences > School of Finance and Management
Faculty of Law and Social Sciences > School of Finance and Management > Centre for Financial and Management Studies (CeFiMS)
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HG Finance
Depositing User: Pasquale Scaramozzino
Date Deposited: 10 Feb 2017 10:54
URI: http://eprints.soas.ac.uk/id/eprint/23622

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