An Empirical Study of Capital Structure in China: A Quantile Regression Approach

Based on quantile regression model, we investigate the determinants of Chinese listed firms' capital structure with a large panel from 1997 to 2006. Five factors, namely firm size, asset tangibility, growth, profitability and non-debt tax shields, are used to explain the ratio of debt to firm's total capital, a proxy of capital structure. Unlike the ordinary least squares method, quantile regression approach reveals that such determinant variables produce diversified affects at various level of leverage ratio. By exploiting the full distribution of leverage, conditional quantile regression methods yield new insights into the reasonable choice of leverage ratio for Chinese listed firms.