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Local government turnover and capital structure: evidence from China

Shangkun Liang (Accounting School, Central University of Finance and Economics, Beijing, China)
Fu Xin (Department of Accounting, Hohai University, Nanjing, China)
Junli Yu (Shanghai Jiao Tong University, Shanghai, China)
Gang Zhao (Department of Financial Management, Zhejiang University of Finance and Economics, Hangzhou, China)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 7 November 2022

Issue publication date: 9 February 2023




The political influence on the determinants of capital structure has been under-researched for a long time. Taking the turnover of secretary of municipal committee as a political factor in China, this paper studies the effect of local government officials' turnover on firm's capital structure.


Starting with all A-shares listed firms in the Shanghai and Shenzhen Stock Exchanges from 2001 to 2018, this paper implements the OLS estimation, staggered difference-in-difference approach to investigate the effects of political turnover on the choice of capital structure.


The results show that, driven by government officials' turnover, firms will significantly reduce their leverage. When comparing between formal finance (bank loans) and informal finance (payables), the reduction of capital structure is mainly driven by banks, not by suppliers. Furthermore, two possible channels have been investigated. First, the reduction effects are mainly driven by the SOEs when classifying the types of corporate ownership into SOEs and non-SOEs. Second, the reduction effects exist in areas with the more intense government intervention when considering the heterogeneity of the development of institutional environment in provinces.


This paper first contributes to the literature on the determinants of corporate choice on capital structure. Second, this paper enriches the studies on the economic consequences of local government officials' turnover.



Funding: The study was funded by the Zhejiang Provincial Natural Science Foundation of China (No: LY19G020004); National Social Science Fund of China (No: 22BGL080 and 19BJY029); Research Achievements of Zhejiang Association of Social Sciences (No: 2023N055); National Natural Science Foundation of China (No: 72272164 and 71872196); National Social Science Foundation of China (No: 21&ZD145 and 19ZDA098) and Humanities and Social Sciences Project of the Ministry of Education of China (No: 18YJC790189).


Liang, S., Xin, F., Yu, J. and Zhao, G. (2023), "Local government turnover and capital structure: evidence from China", Asian Review of Accounting, Vol. 31 No. 1, pp. 131-152.



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