Corporate Governance, Ownership Structure and Capital Structure: Evidence From Chinese Real Estate Listed Companies

Abstract

Purpose – This paper seeks to contribute to the existing capital structure and board structure literature by examining the relationship among corporate governance, ownership structure and capital structure. Design/methodology/approach – The paper employs a panel data of 595 firm-year observations from a unique and comprehensive data set of 119 Chinese real estate listed firms from 2014 to 2018. It uses fixed effect and random effect regression analysis techniques to examine the hypotheses. Findings - The results show that the board size, ownership concentration and firm size have positive influences on capital structure. State ownership and firm profitability have inverse influences on capital structure. Research limitations/ implications – The findings suggest that better-governed companies in the real estate sector tend to have better capital structure. These findings highlight the unique Chinese context and also offer regulators a strong incentive to pursue corporate governance reforms formally and jointly with ownership structure. Lastly, the results suggest investors the chance to shape detailed expectations about capital structure behavior in China. Future research could investigate capital structure using different arrangement, conducting face-to-face meetings with the firm’s directors and shareholders. Practical implications– The findings offer support to corporate managers and investors in forming or /and expecting an optimal capital structure, and to policymakers and regulators for ratifying laws and developing institutional support to improve the effectiveness of corporate governance mechanisms. Originality / value – This paper extends, as well as contributes to the current capital structure and corporate governance literature, by proposing new evidence on the effect of board structure and ownership structure on capital structure. The results will help policymakers in different countries in estimating the sufficiency of the available corporate governance reforms to improve capital structure management.