How do Chinese firms adjust their financial leverage: an empirical investigation using multiple GMM models

China Finance and Economic Review

Table 4 Regression output for state-owned enterprises

	OLS	GLS fixed-effects	GMM1	GMM2
LEV(L1)			0.6088***	0.526***
LEV(L1)			−0.0332	−0.0581
PROF	−0.0214*	−0.0137	−0.0471**	−0.044**
PROF	−0.0116	−0.0114	−0.0194	−0.0187
SIZE	0.0459***	0.0510***	0.0374***	0.032***
SIZE	−0.0022	−0.0033	−0.0074	−0.0075
NWC	−0.0289**	−0.0052	−0.0348	−0.0222
NWC	−0.0092	−0.0118	−0.0214	−0.0208
OC5%	−0.0027**	−0.0006	−0.0019	−0.002
OC5%	−0.0011	−0.0014	−0.0016	−0.0015
NDTS	−0.0003	−0.0007	−0.0708*	−0.1124*
NDTS	−0.0003	−0.0004	−0.2026	−0.2127
BSIZE	−0.0057	−0.0023*	−0.0001	−0.0002
BSIZE	−0.0016	−0.0017	−0.0004	−0.0004
MTB	0.0063**	0.0063	0.0014	0.0008
MTB	−0.0017	−0.0015	−0.0018	−0.0017
TR	0.0006***	0.006***	0.0007	0.0008
TR	−0.032	−0.0451	−0.0005	−0.0005
INDLEV	0.62***	0.547***	0.2207**	0.2634**
INDLEV	−0.0144	−0.0302	−0.088	−0.0875
LNDLIQ	−0.119	−0.0243	−0.053	−0.0321
LNDLIQ	−0.0808	−0.106	−0.0475	−0.0447
INDHHI	−0.0574***	−0.0453***	−0.0257**	−0.030**
INDHHI	−0.0038	−0.0056	−0.0094	−0.0096
GDP	0.0004	0.0023**	0.0015	0.0012
GDP	−0.0009	−0.0009	−0.0011	(0.00100
INFL	−0.0017**	−0.0013**	0	0
INFL	−0.0007	−0.0006	−0.0005	−0.0005
LR	−0.0046	−0.0043	−0.0063**	−0.004**
LR	−0.003	−0.0027	−0.0027	−0.0026
Constant	−0.5853	−0.7331	−0.6201	−0.4767
Adj R	0.3015	0.2817
F Stat	120.73	50.88
Abond
Wald chi²			826.62***	135.42**
Sargan test			0.237	0.614
Hausman test		49.56***

Standard errors are given in parentheses
*, **, ***Show significance at 90, 95, and 99%, respectively
LEV is the leverage measured through the ratio of debt to asset. PROF is the profitability measured through the ratio of return on equity. SIZE is the firm’s size measured through natural log of firm’s asset. NWC is the networking capital used as a proxy for a firm’s liquidity. OC5% is the ownership concentration. NDTS is thenon-debt tax shield measured through the proportion of the sum of amortization and depreciation to total assets. BSIZE is the board size measured through number of directors on a firm’s board of directors. MTB is the market to book ratio used as a proxy for growth oppurtunities. TR is the tax to earnings ratio used a proxy for corporate tax rate, and it is measured as proportion of taxes to earnings before taxes. INDLEV is the median industry leverage as median of total debt to total asset ratios of involved companies in an industry. INDLIQ is the industry liquidity. INDHHI is Herfindahl–Hirschman Index (HHI) as the sum of the squares of a firm’s sales to an industry’s total sales. GDP is the real annual gross domestic product. INFL is the inflation rate in China. LR is the lending rate in China