Effect of Capital Structure of China Listed Companies on Financing Decisions - Dissertation Example

The paper “Effect of Capital Structure of China Listed Companies on Financing Decisions” is an outstanding example of a finance & accounting dissertation. Capital structure is one of the core points for enterprise financial decision-making. It is the most essential element used in establishing a company. The aim of this research is to analyze the effects of the capital structure of China Listed Companies on financing decisions.Research Methods: the main methodology applied in this dissertation was empirical analysis and secondary research on relevant articles discussing the effects of capital structure on financing decisions on public listed companies in China and Western and Asian states.

Results: there is a nature in the Chinese corporate world. Chinese listed companies use a “new Pecking order” since the main assumptions behind the Western models are not applied in China.Conclusion: from the empirical analysis, Chinese companies were found to mainly consider the tax effect during long-term debt financing. Their long-term debt level is lower compared to western firms; and both institutional ownership and state ownership lack any considerable impact on the capital structure in Chinese companies.

Effect of Capital Structure of China Listed Companies on Financing DecisionsChapter 1: IntroductionBackgroundListed firms and stock markets were not in existence in China till the late 80s when the country’s regime opted to restructure the industrial sector that was dominated by state-owned enterprises (SOEs). After 1980, department stores in Beijing were granted permission to issue shares. This move was seen as a counter to the heavy losses incurred by SOEs in China (Wang 2003, p. 4). The following years saw more SOEs go public by selling shares to their own workers and other stock firms and SOEs.

New stock firms followed suit. Stock trading was illegal and the low liquidity of stocks made it tough for firms to market their initial offerings. This caused the state to form the Shanghai Stock Exchange and the Shenzhen Stock Exchange, in 1990 and 1991, respectively. Since then, the number of listed companies, total market capitalization, and trading volume have increased dramatically.