Journal of Finance and Accounting

| Peer-Reviewed |

State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China

Received: 10 March 2017    Accepted: 28 April 2017    Published: 06 July 2017
Views:       Downloads:

Share This Article

Abstract

We examine the impacts of governmental intervention on firms’ leverages ratios based on Chinese state-owned enterprises (SOEs) from 1998 to 2016. Research finds: 1) Governmental intervention is positively correlated with SOEs’ leverage ratios, and this relationship is more notable when there are higher levels of governmental intervention; 2) SOEs’ leverage ratios are negatively correlated with actual tax rates, and this relationship is more noteworthy for more profitable SOEs. These results also indicate: 1) In transitional countries such as China, government may serve as an important factor in firms’ financing decisions. Firms can raise leverage ratios to escalate their bargaining powers with government and resist loss from governmental intervention; 2) SOEs may use debt as a tool to reduce their tax burdens in this way.

DOI 10.11648/j.jfa.20170504.16
Published in Journal of Finance and Accounting (Volume 5, Issue 4, July 2017)
Page(s) 159-164
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

State-Owned Enterprise, Debt Tool, Governmental Intervention

References
[1] Bronars S G, D R Deere. The threat of unionization, the use of debt, and the preservation of shareholder wealth [J] The Quarterly Journal of Economics, 1991, 106(1):231~254.
[2] Chen D H, X Y Chen, H L Wan. Salary regulation and company-paid consumption in SOEs [J]. Economic Research Journal, 2005(2):92-101.
[3] Chen S, Z Sun, S Tang, D Wu. Government intervention and investment efficiency: Evidence from China [J]. Journal of Corporate Finance, 2011, 17(2):259~271.
[4] DeAngelo H, R W Masulis. Optimal capital structure under corporate and personal taxation [J]. Journal of Financial Economics, 1980, 8(1):3-29.
[5] Fan G, X L Wang, G R Ma. The contribution of marketization progress to economic growth in China [J]. Economic Research Journal, 2011(9):4-16.
[6] Flannery M J, K P Rangan. Partial adjustment toward target capital structures [J]. Journal of Financial Economics, 2006(79):469–506.
[7] Graham J R, M T Leary. A review of empirical capital structure research and directions for the future [J]. Annual Review of Financial Economics, 2011, 3(1):309-345.
[8] Li H, L A Zhou. Political turnover and economic performance: the incentive role of personnel control in China [J]. Journal of Public Economics, 2005, 89(9):1743~1762.
[9] Lin J Y, F Cai, Z Li. Competition, policy burdens, and state-owned enterprise reform [J]. American Economic Review, 1998, 88(2):422~427.
[10] Liu X, X R Li. Pyramid structure, tax burden and corporate value: evidence from local state-owned enterprises [J]. Management World, 2012(8):91-105.
[11] Liu H L, M Zhang, Y P Wang, W L Sheng. Political relationships, salary incentives and staff allocation efficiency [J]. Economic Research Journal, 2011(9):134-138.
[12] Myers S C. Determinants of corporate borrowing [J]. Journal of Financial Economics, 1977, 5(2): 147-175.
[13] Myers S C. Capital Structure Puzzle [J]. Journal of Finance, 1984, 39(3):575-92.
[14] Rajan R G, L Zingales. What Do We Know about Capital Structure? Some Evidence from International Data [J]. Journal of Finance, 1995, 50(5):1421-1460.
[15] Wang Y Q, Yan Zhang, Yuan Zhang, Z Chen, M Lu. Chinese economy in the crossroads: analysis based on current literature [J]. Journal of World Economy, 2006(10):3-20.
[16] Wu L S. State-owned equity, tax benefits and corporate tax burden [J]. Economic Research Journal, 2009(10):109-120.
[17] Xin Q Q, W Q Tan. Marketization reform, corporate performance and management compensation in SOEs [J]. Economic Research Journal, 2009(11):68-81.
Author Information
  • International Business School, Beijing Foreign Studies University, Beijing, P. R. China

Cite This Article
  • APA Style

    Dehong Wang. (2017). State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China. Journal of Finance and Accounting, 5(4), 159-164. https://doi.org/10.11648/j.jfa.20170504.16

    Copy | Download

    ACS Style

    Dehong Wang. State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China. J. Finance Account. 2017, 5(4), 159-164. doi: 10.11648/j.jfa.20170504.16

    Copy | Download

    AMA Style

    Dehong Wang. State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China. J Finance Account. 2017;5(4):159-164. doi: 10.11648/j.jfa.20170504.16

    Copy | Download

  • @article{10.11648/j.jfa.20170504.16,
      author = {Dehong Wang},
      title = {State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China},
      journal = {Journal of Finance and Accounting},
      volume = {5},
      number = {4},
      pages = {159-164},
      doi = {10.11648/j.jfa.20170504.16},
      url = {https://doi.org/10.11648/j.jfa.20170504.16},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jfa.20170504.16},
      abstract = {We examine the impacts of governmental intervention on firms’ leverages ratios based on Chinese state-owned enterprises (SOEs) from 1998 to 2016. Research finds: 1) Governmental intervention is positively correlated with SOEs’ leverage ratios, and this relationship is more notable when there are higher levels of governmental intervention; 2) SOEs’ leverage ratios are negatively correlated with actual tax rates, and this relationship is more noteworthy for more profitable SOEs. These results also indicate: 1) In transitional countries such as China, government may serve as an important factor in firms’ financing decisions. Firms can raise leverage ratios to escalate their bargaining powers with government and resist loss from governmental intervention; 2) SOEs may use debt as a tool to reduce their tax burdens in this way.},
     year = {2017}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China
    AU  - Dehong Wang
    Y1  - 2017/07/06
    PY  - 2017
    N1  - https://doi.org/10.11648/j.jfa.20170504.16
    DO  - 10.11648/j.jfa.20170504.16
    T2  - Journal of Finance and Accounting
    JF  - Journal of Finance and Accounting
    JO  - Journal of Finance and Accounting
    SP  - 159
    EP  - 164
    PB  - Science Publishing Group
    SN  - 2330-7323
    UR  - https://doi.org/10.11648/j.jfa.20170504.16
    AB  - We examine the impacts of governmental intervention on firms’ leverages ratios based on Chinese state-owned enterprises (SOEs) from 1998 to 2016. Research finds: 1) Governmental intervention is positively correlated with SOEs’ leverage ratios, and this relationship is more notable when there are higher levels of governmental intervention; 2) SOEs’ leverage ratios are negatively correlated with actual tax rates, and this relationship is more noteworthy for more profitable SOEs. These results also indicate: 1) In transitional countries such as China, government may serve as an important factor in firms’ financing decisions. Firms can raise leverage ratios to escalate their bargaining powers with government and resist loss from governmental intervention; 2) SOEs may use debt as a tool to reduce their tax burdens in this way.
    VL  - 5
    IS  - 4
    ER  - 

    Copy | Download

  • Sections