The influence of internal corporate governance mechanisms on capital structure decisions of Chinese listed firms

Agyenim Boateng, Huifen Cai, Daniel Borgia, Xiaogang Bi, Franklin Ngwu

    Research output: Contribution to journalArticle

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    Abstract

    Purpose: This paper examines the effects of internal corporate governance mechanisms on the capital structure decisions of Chinese listed firms.
    Design/Methodology: Using a large and more recent dataset consisting of 2386 Chinese listed firms over the period from 1998 to 2012, we employ panel data and use different statistical methods (OLS, fixed effects, and system GMM) to analyse the effects of firm-specific and corporate governance influences on capital structure.
    Findings: We find that the proportion of independent directors and ownership concentration exert significant influence on the level of Chinese long-term debt ratios after controlling for firm-specific determinants and split share reforms. Further analysis separating our sample into state-owned enterprises (SOEs) and privately- owned enterprises (POEs) suggests that ownership concentration in the hands of the state leads to decrease in debt ratios.
    Implications: The finding implies that concentrated ownership in the hands of the state appears more efficient compared to their private counterparts in their monitoring role.
    Original Value:This study extends prior literature, which has concentrated disproportionately on firm-specific influences on capital structure, to the effects of within-firm governance mechanisms on capital structure decisions. The paper contributes to the agency theory-capital structure discourse in an emerging country context where corporate governance system appears weak.
    Original languageEnglish
    Pages (from-to)444-461
    Number of pages33
    JournalReview of Accounting and Finance
    Volume16
    Issue number4
    Early online date6 Oct 2017
    DOIs
    Publication statusPublished - 13 Nov 2017

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    Capital structure
    Corporate governance mechanisms
    Corporate governance
    Debt ratio
    Ownership concentration
    Design methodology
    Emerging countries
    Long-term debt
    Panel data
    Agency theory
    Monitoring
    Fixed effects
    System-GMM
    Independent directors
    Proportion
    State-owned enterprises
    Concentrated ownership
    Governance mechanisms
    Discourse
    Statistical methods

    Keywords

    • corporate governance
    • capital structure
    • Chinese listed firms

    Cite this

    Boateng, Agyenim ; Cai, Huifen ; Borgia, Daniel ; Bi, Xiaogang ; Ngwu, Franklin. / The influence of internal corporate governance mechanisms on capital structure decisions of Chinese listed firms. In: Review of Accounting and Finance. 2017 ; Vol. 16, No. 4. pp. 444-461.
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    abstract = "Purpose: This paper examines the effects of internal corporate governance mechanisms on the capital structure decisions of Chinese listed firms. Design/Methodology: Using a large and more recent dataset consisting of 2386 Chinese listed firms over the period from 1998 to 2012, we employ panel data and use different statistical methods (OLS, fixed effects, and system GMM) to analyse the effects of firm-specific and corporate governance influences on capital structure.Findings: We find that the proportion of independent directors and ownership concentration exert significant influence on the level of Chinese long-term debt ratios after controlling for firm-specific determinants and split share reforms. Further analysis separating our sample into state-owned enterprises (SOEs) and privately- owned enterprises (POEs) suggests that ownership concentration in the hands of the state leads to decrease in debt ratios. Implications: The finding implies that concentrated ownership in the hands of the state appears more efficient compared to their private counterparts in their monitoring role. Original Value:This study extends prior literature, which has concentrated disproportionately on firm-specific influences on capital structure, to the effects of within-firm governance mechanisms on capital structure decisions. The paper contributes to the agency theory-capital structure discourse in an emerging country context where corporate governance system appears weak.",
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    The influence of internal corporate governance mechanisms on capital structure decisions of Chinese listed firms. / Boateng, Agyenim; Cai, Huifen; Borgia, Daniel; Bi, Xiaogang; Ngwu, Franklin.

    In: Review of Accounting and Finance, Vol. 16, No. 4, 13.11.2017, p. 444-461.

    Research output: Contribution to journalArticle

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    AU - Bi, Xiaogang

    AU - Ngwu, Franklin

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    N2 - Purpose: This paper examines the effects of internal corporate governance mechanisms on the capital structure decisions of Chinese listed firms. Design/Methodology: Using a large and more recent dataset consisting of 2386 Chinese listed firms over the period from 1998 to 2012, we employ panel data and use different statistical methods (OLS, fixed effects, and system GMM) to analyse the effects of firm-specific and corporate governance influences on capital structure.Findings: We find that the proportion of independent directors and ownership concentration exert significant influence on the level of Chinese long-term debt ratios after controlling for firm-specific determinants and split share reforms. Further analysis separating our sample into state-owned enterprises (SOEs) and privately- owned enterprises (POEs) suggests that ownership concentration in the hands of the state leads to decrease in debt ratios. Implications: The finding implies that concentrated ownership in the hands of the state appears more efficient compared to their private counterparts in their monitoring role. Original Value:This study extends prior literature, which has concentrated disproportionately on firm-specific influences on capital structure, to the effects of within-firm governance mechanisms on capital structure decisions. The paper contributes to the agency theory-capital structure discourse in an emerging country context where corporate governance system appears weak.

    AB - Purpose: This paper examines the effects of internal corporate governance mechanisms on the capital structure decisions of Chinese listed firms. Design/Methodology: Using a large and more recent dataset consisting of 2386 Chinese listed firms over the period from 1998 to 2012, we employ panel data and use different statistical methods (OLS, fixed effects, and system GMM) to analyse the effects of firm-specific and corporate governance influences on capital structure.Findings: We find that the proportion of independent directors and ownership concentration exert significant influence on the level of Chinese long-term debt ratios after controlling for firm-specific determinants and split share reforms. Further analysis separating our sample into state-owned enterprises (SOEs) and privately- owned enterprises (POEs) suggests that ownership concentration in the hands of the state leads to decrease in debt ratios. Implications: The finding implies that concentrated ownership in the hands of the state appears more efficient compared to their private counterparts in their monitoring role. Original Value:This study extends prior literature, which has concentrated disproportionately on firm-specific influences on capital structure, to the effects of within-firm governance mechanisms on capital structure decisions. The paper contributes to the agency theory-capital structure discourse in an emerging country context where corporate governance system appears weak.

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