Author: Zhang, Yu
Title: The effect of financial supervision on capital structure: evidence from real estate firms in China
Advisors: Shen, Jianfu Jeff (BRE)
Degree: M.Sc.
Year: 2020
Subject: Finance -- Government policy -- China
Real estate business -- China
Real property -- Government policy -- China
Financial services industry -- China -- State supervision
Banks and banking -- China -- State supervision
Hong Kong Polytechnic University -- Dissertations
Department: Department of Building and Real Estate
Pages: iv, 77 pages : color illustrations
Language: English
Abstract: The issue of how China's unique institutional features shape capital structure decisions has not been paid due attention and there is a debate on the effect of China's government-directed financial restraints. To provide new insights for these issues, the paper examines the impacts of the recent strict financial supervision, as a supply-side exogenous shock, on corporate capital structure decisions and financing behaviors in the real estate sector of China. Using a panel data set of 79 listed Chinese companies for the period 2010Q3-2019Q4, we obtain four major findings. First, this round of strict financial supervision has a significant inhibitory effect on interests-bearing type liabilities of real estate companies by restricting the flow direction of the funds of financial institutions. Second, the middle stage of this supervision has the greatest negative impact on the leverage ratios of real estate firms, because of its more restrictions on the main financing channels and stronger enforceability. Thirdly, trade credit, especially advance receipts from homebuyers, has a substitution effect on interest-bearing liabilities, and this substitution effect is enhanced under the supervision. Fourthly, the supervision has a greater impact on reducing the interests-bearing debts of large and state-owned developers than that of small and non-state-owned developers, while its positive impact on the advance receipts of large and state-owned developers is higher than that of small and non-state-owned developers to a greater extent. Our findings verify the effectiveness of this financial supervision under the typical Chinese government intervention and interpret real estate firms' financing decisions and behaviors under the financing environment with discrimination and the institutional system that state ownership plays a pivotal role in realizing the government's will.
Rights: All rights reserved
Access: restricted access

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