Company characteristics, macroeconomic conditions and dynamic capital structure adjustment in China

Target capital structure choice and capital structure adjustment speed vary over time due to the different company characteristics and macroeconomic conditions. Based on the unbalanced panel data of Chinese nonfinancial listed companies from 1997 to 2006, this article builds a partial adjustment capital structure model which endogenize some decisive factors of target capital structure, and the empirical results show that the company´s capital structure is significantly influenced by firm-specific characteristics as well as macroeconomic factors, and the adjustment speed of company´s capital structure is significantly influenced by macroeconomic factors which are defined by GDP growth rate or term spread. Companies adjust to their target leverage faster in good macroeconomic conditions than in bad macroeconomic conditions.