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Business Life Cycle and Capital Structure: Evidence from Chinese Manufacturing Firms
Author(s) -
Tian Lin,
Han Liang,
Zhang Song
Publication year - 2015
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12105
Subject(s) - cash flow , business cycle , business , monetary economics , capital structure , industrial organization , capital (architecture) , panel data , product life cycle management , economics , finance , macroeconomics , econometrics , marketing , debt , history , archaeology
This paper uses a panel data‐fixed effect approach and data collected from Chinese public manufacturing firms between 1999 and 2011 to investigate the impacts of business life cycle stages on capital structure. We find that cash flow patterns capture more information on business life cycle stages than firm age and have a stronger impact on capital structure decision‐making. We also find that the adjustment speed of capital structure varies significantly across life cycle stages and that non‐sequential transitions over life cycle stages play an important role in the determination of capital structure. Our study indicates that it is important for policy‐makers to ensure that products and financial markets are well‐balanced.