Margin trading program and dynamic adjustment of corporate capital structure: evidence from a quasi-natural experiment in ChinaJul. 28,2020
Based on the quasi-natural experiment of step-by-step expansion of margin trading program in China, this paper used the DID model to investigate the impact of margin trading program on the dynamic adjustment of corporate capital structure, and also discussed whether there are significant differences in the impact of the implementation of short selling on the adjustment rate of the capital structure when the capital structure is below or above the target level. This paper found that the margin trading program significantly accelerates the adjustment of corporate capital structure, which is driven by the pressure of the short selling mechanism. After the adjustment direction is further distinguished, it is found that when the capital structure is higher than the target level, namely that the capital structure is adjusted downward, the short selling pressure plays a greater role in accelerating the adjustment of the capital structure. Channel tests show that the promoting effect of short selling pressure on the adjustment of capital structure is more significant when the information asymmetry or the agency cost is high. This paper examines the value effect of margin trading program from the perspective of dynamic adjustment of capital structure. At the same time, based on the close relationship between corporate leverage ratio and capital structure, it provides theoretical basis for the role of China’s financial innovation reform in promoting deleveraging of firms from the new perspective of short selling pressure, and provides new evidence for the necessity and importance of China’s financial reform.
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