Capital structure choice of public companies in China: an agency cost model

Abstract

A cross-sectional regression model is estimated to examine interrelations among corporate governance mechanisms, ownership structure and capital structure decisions in China. Consistent with previous research, this study provides further evidence of the relations between debt and profitability and between debt and firm size. The evidence that the State may dominate in the process of determining capital structure choice of public companies in China is weak. And foreign investors (mainly institutional investors) tend to put negative pressure on firm leverage. This paper contributes to the literature by revealing some relations behind the observed debt pattern of public companies in China.