What are the reliably important determinants of capital structure in china?

• We identify seven core factors explaining book leverage.
• We find three new core factors not observed in the previous literature.
• The new core factors are asset growth, state control and the largest shareholding.
• The state-control dummy is negatively associated with book leverage.
• The negative effect of state-control derives from easier access to equity financing.

Existing studies disagree over the basic determinants of capital structure in Chinese firms. We identify profitability, industry leverage, asset growth, tangibility, firm size, state control, and the largest shareholding as reliable core factors explaining book leverage. Compared with evidence from the United States and other countries, we identify three new core factors, and observe that the relative importance of four common core factors for Chinese firms is diverse. In particular, the state-control dummy is negatively associated with book leverage, contrary to findings in certain previous studies. Additional tests indicate that such a negative effect of state-control derives primarily from easier access to equity financing.