Abstract

The idea of this study is to identify the determinants of corporate financial structure for the IT industry in China which is a promising service industry but is facing challenges and risk in the Global financial turmoil.In this paper,we analyze the determinants of the capital structure for a panel of 92 IT companies listed in the China stock exchange. Six traditional explanatory variables are adopted in the study,including size, profitability, tangibility, liquidity, profit growth rate and growth opportunity.Linear regressions are used to study the effects of the factors.It is found that the size of companies are positively related to leverage, while growth and profitability, liquidity, profit growth rate and growth opportunity are negatively associated with leverage.The sign of these relations suggest that both the pecking order theory and trade off hypothesis are at work in explaining the capital structure of IT companies.

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