Capital Structure Adjustment in China’s Construction Companies: An Empirical Evidence
A two-stage dynamic partial adjustment model is estimated by GMM estimator using panel data of China’s listed construction companies over the period of 2009- 2018. This study examines ten empirical determinants of capital structure adjustment of China’s listed construction companies comprising both company specific and macroeconomic factors. We use OLS and Probit regression analysis to estimate the effect of selected determinants on adjustment speed and adjustment direction, respectively, and we also use difference-in-difference method to examine the effects of macroeconomic policies on capital structure adjustment. This research findings show that capital structure deviation, GDP growth, exchange rate and stock market development have a positive impact on capital structure adjustment of China’s listed construction companies. However, company size, growth and credit squeeze have a negative impact on capital structure adjustment of China’s listed construction companies. Moreover, state-owned and large listed construction companies can adjust capital structure faster in an economic stimulus.
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