'Lower leverage puzzle' in China's listed firms: an empirical study based on firm efficiency
by Xindong Zhang; Ling Ni; Yiping Chen
International Journal of Management and Enterprise Development (IJMED), Vol. 12, No. 1, 2012

Abstract: This paper attempts to interpret 'lower leverage puzzle' in China's listed firms from the perspective of firm efficiency. It investigates the relationship between firm efficiency and capital structure based on a sample study of 1,000 firm-year panel data of public firms in Shanghai Stock Exchange from 2004-2008. The findings show that between them two there exists a significant reversal exponential relationship, and also indicate that the 'lower leverage' is practically a natural choice of higher efficiency firms. Furthermore, it is suggested that the development stage of security market should be taken into consideration of the capital structure theory.

Online publication date: Sat, 06-Sep-2014

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