State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China
Journal of Finance and Accounting
Volume 5, Issue 4, July 2017, Pages: 159-164
Received: Mar. 10, 2017; Accepted: Apr. 28, 2017; Published: Jul. 6, 2017
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Dehong Wang, International Business School, Beijing Foreign Studies University, Beijing, P. R. China
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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.
State-Owned Enterprise, Debt Tool, Governmental Intervention
To cite this article
Dehong Wang, State-Owned Enterprise: Debts as Tools and Governmental Intervention – Evidence from China, Journal of Finance and Accounting. Vol. 5, No. 4, 2017, pp. 159-164. doi: 10.11648/j.jfa.20170504.16
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