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International Journal of Academic Research in Accounting, Finance and Management Sciences

Open Access Journal

ISSN: 2225-8329

The Moderating Effect of Labor Market Development on the Relationship between Ownership Structure and Capital Structure: Evidence from Chinese Listed Companies

Chu Wang, Lian Kee Phua, Char-Lee Lok

http://dx.doi.org/10.6007/IJARAFMS/v13-i1/16194

Open access

This study aims to analyze the impact of ownership structure on corporate capital structure, moderated by labor market development in China. This study uses panel data with 12,305 observations collected for the period 2016-2020, from A-Share Chinese listed firms on Shanghai and Shenzhen Stock Exchanges. The data were analyzed using fixed effect regression. The findings demonstrate that ownership concentration, managerial ownership, and institutional ownership have negative impacts on a firm’s leverage supported by agency theory. Additionally, this study indicates that the impact of managerial ownership is mitigated in instances where firms are located in areas with better labor market development. Likewise, the effect of institutional ownership diminishes with better labor market development. This research helps managers to evaluate the impact of ownership structure on firm leverage in Chinese regions with various levels of labor market development. It also informs Chinese policymakers to take full account of the institutional environment of different regions when developing relevant policies on the firm’s leverage level and to pay particular attention to geographical differences.

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In-Text Citation: (Wang et al., 2023)
To Cite this Article: Wang, C., Phua, L. K., & Lok, C.-L. (2023). The Moderating Effect of Labor Market Development on the Relationship between Ownership Structure and Capital Structure: Evidence from Chinese Listed Companies. International Journal of Academic Research in Accounting Finance and Management Sciences, 13(1), 136–152.