The Determinants of Capital Structure in Chinese Listed Companies

This paper attempts to investigate the determinants of the capital structure of a sample of 1456 listed companies on the Hong Kong Stock Exchange from 2005 to 2010. However, 226 companies have to be excluded from the analysis because the data is not complete. This study uses 1230 companies to make the investigation to determine the capital structure of Chinese listed companies. The relationship between size, profitability, liquidity, growth opportunity, asset structure, business risk and tax shield with leverage are highlighted. The findings show that size, profitability, business risk and tax shield are highly significant at 1% level in determining the capital structure while liquidity is significant at 10% level. However, growth opportunity and asset structure are not significant determinants of capital structure in China.