Abstract
This research focuses on the capital structure and the corporate performance in China. This research introduces different theories of capital structure. It reviews the studies conducted in different economic entities about this topic and combine with the current research in China, which can provide the evidences for this research to give the assumptions. This research uses three models, ordinary least squares (OLS), fixed effect (FE), and generalized method of moments (GMM) to process the data and find out the relationship between the capital structure and the corporate performance in China. The results of this research show a significant negative correlation between the leverage level and the return on assets of Chinese firms. It shows the relationship between the capital structure and the corporate performance. This research explains this relationship by the characteristics of Chinese market and tries to give suggestion for practice.
Highlights
After the introduction of the reform and opening policy in 1970s, China has been experiencing a rapid economic growth, which made China become the second largest economic entity in the world
This research has studied on the capital structure and the corporate performance in China
The aim of this research was to find out the relationship between the capital structure and the corporate performance in Chinese market under this condition
Summary
After the introduction of the reform and opening policy in 1970s, China has been experiencing a rapid economic growth, which made China become the second largest economic entity in the world. China has its unique characteristics, such as the special political and economic systems, which makes China different from other markets. It shows the significance to study Chinese market. Multiple studies have tried to figure out the relationship between capital structure and companies’ values and performances [1]. This research is to find out the relationship between capital structure and companies’ performance in China. The aim of this research is the capital structure and corporate performance in Chinese market. It will try to find out the relationship between capital structure and corporate performance in China. It will try to explain the relationship by the characteristics of Chinese market
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