This paper conducts pooled cross-sectional time-series analysis for listed Chinese firms using 3013 firm-year observations for the period of 1991 to 2000. By implementing various empirical tests, this paper shows that compared with non-growth firms, growth firms tend to have significantly lower debt to equity ratios and also tend to have lower dividend yields. These findings are consistent with contracting costs explanations for firms' choices of debt and dividend polices. These findings also imply that growth opportunities play an important role in corporate policy choices of listed Chinese firms. The paper also provides additional evidence that state shareholding is an important influential factor in corporate policy choices of listed Chinese firms, although its influence doesn't chan...[ Read more ]

This paper conducts pooled cross-sectional time-series analysis for listed Chinese firms using 3013 firm-year observations for the period of 1991 to 2000. By implementing various empirical tests, this paper shows that compared with non-growth firms, growth firms tend to have significantly lower debt to equity ratios and also tend to have lower dividend yields. These findings are consistent with contracting costs explanations for firms' choices of debt and dividend polices. These findings also imply that growth opportunities play an important role in corporate policy choices of listed Chinese firms. The paper also provides additional evidence that state shareholding is an important influential factor in corporate policy choices of listed Chinese firms, although its influence doesn't change the applicability of the contracting costs theory in China. Results show that firms with a higher level of government ownership generally have higher debt to equity ratios, higher dividend yields and lower growth opportunities.