Essays in corporate investment and finance in China

Wang, Zhixiao (2018) Essays in corporate investment and finance in China. PhD thesis, University of Glasgow.

Abstract

This thesis extends the literature by adding new empirical evidence associated with firm’s decisions in fixed investment and capital structure, under the assumption of capital market imperfection. In Chapter 2, we combine a panel of over 95,000 Chinese manufacturing firms of different ownership types over the period 2000-2007 with the Marketization Index for China’s provinces during the same period and investigate whether or not, and how, the cross-regional differences in institutions and financial development can affect the firm level financing constraints. Our main results indicate that institutional and financial development in China can reduce financing constraints significantly for the investments of private firms and partly for foreign firms, while increasing the financing constraints for the investments of state and collective firms. Different from previous studies at aggregate level, we identify a positive relation between finance and growth in the Chinese economy from a micro-perspective. In Chapter 3, we estimate the respective effect of state ownership and share concentration on firms’ leverage adjustment speed towards optimal level by using the Chinese listed firms dataset (1998-2010). We find that the firms with state ownership present lower leverage adjustment speed towards optimal leverage ratio than their privately owned counterparts. A positive relation from share concentration to leverage adjustment speed is also detected. These results suggest that ownership structure can significantly determine a firm’s costs of adjustment as well as incentives to adjust. Our works offer a new channel for people to understand the heterogeneous leverage adjustment behaviours among firms. In Chapter 4, using the Chinese listed firms dataset (1998-2016), we test the casual relation from short debt maturity to firms’ fixed capital expenditure. After controlling the level of leverage, we obtain a significant negative coefficient on short debt maturity in the investment regression model, especially for the sample of firms with worse financial condition. This indicates that rollover risk plays an important role in determining firms’ investment decisions and it is more likely to be triggered at bad time. Overall, our research suggest several policy implications. First, deeper economic decentralization and further financial liberalization are important for reducing the resource misallocation between state and non-state sectors in the Chinese economy. Second, more applicable provisions for minority investor protection are required to be formulated, which are expected to provide more options for ownership reform in publicly listed SOEs. Lastly, alternatives for long-term debt financing, other than bank loans, have to be developed, thereby reducing the systematic rollover risk in the economy.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Keywords: Financing constraints, fixed investment, capital structure, ownership structure.
• Subjects: H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School
• Supervisor's Name: Ding, Dr. Sai and Kim, Dr. Minjoo
• Date of Award: 2018
• Embargo Date: 26 July 2021
• Depositing User: Zhixiao Wang
• Unique ID: glathesis:2018-30699
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 26 Jul 2018 10:06
• Last Modified: 26 Jul 2021 08:52
• URI: https://theses.gla.ac.uk/id/eprint/30699