The Importance of Stock Seasoning and Internal Governance Mechanisms on Chinese Firms' Corporate Leverage Decisions

Seminar abstract

This present study examines the evolution of capital structure for Chinese stock issuers over an eleven year period, comprising of three years pre-IPO to eight years post-IPO.

The first stage of analysis assesses issuers' pre-listing debt characteristics in relation to IPO pricing outcomes. Findings suggest the short term debt constrains issuers' Q and under-pricing levels, while weakening the prospects of vendor sales at IPO.

Strong negative associations also exist between short term leverage and dividend payout rates (during the pre and post IPO periods).

The second stage the papers analysis addresses the relation between corporate leverage and firm governance. Issuer indebtedness exhibits little connection with board independence duality and gender diversity. However, an inverse association emerges between leverage rates and board officer age. Entities with older boards also experience smaller falls in leverage on listing, as well as reduced upswing post IPO.

Results are consistent with older board firms possessing fewer growth options and raising less capital at IPO.

The third focus area examines leverage change. Following drops in leverage at IPO, rates generally rebound within three to four years. However, and consistent with 'delays' to the adjustment process brought about by the Global Financial Crisis, adjustments persist beyond this time frame. 

Findings offer more support for the contentions in Alti (2006), Guney and Iqbal-Hussain (2010) and Dudley and James (2018), leverage change at IPO appears broadly comparable for hot and cold marker issuers.

Booking

The seminar is free to attend and there is no need to book in advance. Please bring your friends, colleagues and classmates along.

Speaker bio

Professor Paul B. McGuinness is a Tenured Professor in the Department of Finance at The Chinese University of Hong Kong (CUHK).

Prior to his appointment at CUHK, Professor McGuinness was a faculty member of the School of Industrial and Business Studies at the University of Warwick in the UK.

Professor McGuinness' research activities include the following:

• Financial markets
• Securities analysis
• Corporate finance
• Chinese equity markets

He has published numerous papers in international refereed journal outlets such as;

• Journal of Corporate Finance
• British Journal of Management
• Journal of Banking and Finance

to name a few.

He has also published widely in professional and business style journals.

Professor McGuinness has also conducted consultancy work pertaining to securities market-related issues in Hong Kong and the Mainland PRC.