Manager Characteristics and the Choice of Firm “Low Leverage”: Evidence from China

Yiping Chen, Xindong Zhang, Zhe Liu

School of Economic and Management, Shanxi University, Taiyuan, China.

DOI: 10.4236/ajibm.2014.410062                

Abstract

In this paper, we analyze the low-leverage phenomenon of firms and examine the question of why some firms have low leverage in China. We find Low-leverage firms are smaller, have higher profitability and hold more cash balances than control firms chosen by industry and size. Our evidence supports the hypothesis that these firms are operated by risk-aversion manager. Firms with older Chief Executive Officer (CEO) and higher first shareholder ownership are more likely to have low debt. Also, CEO gender is one of the determinants of low-leverage choice.

Keywords

Capital Structure, Low-Leverage Puzzle, Manager, Risk-Aversion, Gender

Conflicts of Interest

The authors declare no conflicts of interest.

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