How do Chinese listed companies adjust their capital structure toward targets?

Based on partial adjustment model, this paper suggests an empirical framework to examine the adjustment speed of capital structure with a specific adjustment approach, including commercial credit, short-term debt, long-term debt, stock and retained earnings. The main findings are followed. Most capital structure adjustments of Chinese listed companies occur by external finances. Issuing stock is the most effective adjustment approach, while retained earnings is with the slowest adjustment speed. The adjustment speed of external finances in financial surplus companies is higher than the one in financial deficit companies. Both financial situation and ownership nature affect the approach speed. Adjustment by issuing stock in non-state-owned companies is more effective than the one in state-owned companies.