Determinants of Capital Structure A Comparison Between UK and Chinese List Companies

Hu, Zongyao (2013) Determinants of Capital Structure A Comparison Between UK and Chinese List Companies. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

For a long time, the choice of capital structure is the decision of corporate financing method has been the core issue of corporate governance; it is also the focus of economists as well as practitioners. It affects not only the governance structure of the company but also determines the characteristics of corporate behaviour and firm value. Reasonable capital structure can regulate corporate behaviour and improve enterprise value. However, the distortions of capital structure may cause the dislocation on corporate behaviour and the decline in enterprise value. Research on capital structure determinants to optimize the capital structure has a strong practical significance for improving the value of the company and protecting the interests of investors.

This paper analyzes the determinants of capital structure for a panel of 153 UK list companies and 206 Chinese list companies in order to find the difference between them. Both short term leverage and long term leverage are the dependent variables. Seven explanatory variables, which including size, profitability, growth opportunity, asset tangibility, nondebt tax shield, liquidity and uniqueness are adopted in this study. Hausman test and Breusch-Pagan Lagrangian multiplier test are employed to select the efficient models to do the regression. The results show that there exists a difference between UK and Chinese list companies in terms of the capital structure determinants and their effects on leverage. This is because the unique conditions of the Chinese economy and list companies. In addition, the sign of these relations indicates that neither theory can perfect explain the capital structure of both UK and Chinese list companies; the combination of classical theories may produce a better explanation of capital structure.

Keywords: Capital structure, Trade off theory, Pecking order theory, Agency theories, Chinese listed firms.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 07 Mar 2014 09:57
Last Modified: 22 Oct 2016 13:51
URI: http://eprints.nottingham.ac.uk/id/eprint/26793

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