Capital structure choice in a nascent market: Evidence from listed firms in China

We study the capital structure decisions of listed firms in China between 1992 and 2001. The Chinese market exhibits high information asymmetry, phenomenal growth, highly concentrated ownership, and a lack of external market for corporate control. We find that Chinese firms use little long-term debt, which is positively (negatively) related to firm size and tangibility (profitability and growth options). These results are robust to the degree of seasoning after the initial public offering and private versus State ownership. Although industry membership is important, the development and growth of the stock market did not affect the long-term debt ratios over the years.