Capital structure dynamics with restricted equity issuance: Evidence from Chinese post-IPO firms

Michael Gombola, Feng Ying Liu, De Wai Chou

Research output: Contribution to journalArticle


Chinese firms offer unique insight into capital structure dynamics because tradeoffs and constraints involved differ greatly from Western firms. Greater constraints on equity issuance combined with lesser tax benefits and bankruptcy cost should present fewer incentives for a target capital structure. Nevertheless, we find the capital structure behavior over time of Chinese firms is similar to US firms in gravitating toward a common mean and exhibiting at least as much persistence, and a similar speed of adjustment. Perhaps capital structure dynamics of both American and Chinese firms are based on managerial preferences that stem from tradition or observed practices rather than any of the extant theories.

Original languageEnglish
Pages (from-to)72-85
Number of pages14
JournalAsia Pacific Management Review
Issue number1
Publication statusPublished - 2019 Mar 1



  • Capital structure
  • Chinese IPOs
  • Financial leverage

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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