Determinants of Capital Structure in Chinese SMEs: Empirical Evidence from Company Panel Data

Abstract

Although Chinese government has implemented a series of policies for improving the financial environment of small and medium-sized enterprises (SMEs) accessing external funds, to date, it is still unclear what factors determine the capital structure of Chinese SMEs. To address this issue, this paper investigates the relationship between firm characteristics and leverage for a sample of listed SMEs. Using by far the largest and latest panel data sets obtained from the Shenzhen Stock Exchange (SZSE) SMEs board, we find that the capital structure is positively related to tax rate, operating risk, profitability, growth opportunity, size, and tangibility. Asset specificity and state seem to have no significant impact on the leverage of Chinese SMEs.