What determines the leverage decisions of Chinese firms?

We study the leverage decisions of listed Chinese manufacturing firms over the period 1995–2004. We show that some firm characteristics, such as profitability and size, affect the leverage decisions of these firms, while other characteristics such as collateral and growth opportunities do not. Additionally, we find no important differences in the financing of listed firms across eastern (coastal), central and western regions. We also find evidence that contrary to other firms, the leverage of firms located in high FDI recipient provinces and firms who receive more subsidies from the state is not influenced by their profitability. Finally, we consider whether WTO accession affects the leverage of firms but find no strong evidence to support this claim.