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The University of Southampton
Centre for Risk Research

Stock seasoning and the dynamics of corporate leverage Event

Professor Paul McGuinness
13:00 - 14:00
21 August 2019
Building 44, Room 1057, Highfield campus, University of Southampton, SO17 1BJ

For more information regarding this event, please email Mario Brito at .

Event details


This paper examines the evolution of capital structure for Chinese stock issuers over an eleven-year period, comprising three years pre- to eight years post-IPO. This topic is of special interest given the dominance of state-controlled lenders, and the emergence of large numbers of private (i.e., non-state) Chinese issuers. While sample firms experience marked declines in leverage on listing, rates quickly rebound within three to four years. Findings generally offer more support for Alti’s (2006) evidence of target rates, rather than Baker and Wurgler’s (2002) account of capital structure as an analog of past financing events. IPO firms also re-balance debt from short- to long-term sources over the seasoning period. Additionally, strong negative associations exist between short-term leverage and dividend payouts for both pre- and post-IPO periods. Greater short-term debt also constrains issuers’ Q and underpricing levels, as well as the possibility of a vendor sale at IPO. Board independence, duality and gender diversity exert little influence on issuer indebtedness. However, lower rates of pre-IPO leverage are evident in firms with older boards (and/or older CEOs). Such firms experience smaller falls in leverage in the year of listing, as well as reduced upswings post-IPO. Results are consistent with older board firms possessing fewer growth options and raising less capital at IPO. Finally, this study assesses whether IPO firms sell appreciably more equity and at higher pricing multiples during hot-markets (Alti, 2006; Guney and Iqbal-Hussain, 2010; and Dudley and James, 2018). Larger drops in leverage are not generally apparent for such issuers.

Speaker Biography:

Paul B. McGuinness is a Tenured Professor in the Department of Finance at The Chinese University of Hong Kong (CUHK). Prior to his appointment at CUHK, Prof. McGuinness was a faculty member of the School of Industrial and Business Studies at the University of Warwick in the United Kingdom. While on leave from CUHK, he has held positions as the National Bank Chair of Finance at the Victoria University of Wellington, New Zealand (January – December 1996), Head of Research at the Hong Kong securities regulator, the Securities and Futures Commission (July – December 2000), and Visiting Professor in the Department of Economics at Macquarie University in Sydney, Australia (February – June 2008).

Prof. McGuinness’ research activities are in financial markets, securities analysis, corporate finance and Chinese equity markets. He has published widely including a book entitled ‘A Guide to the Equity Markets of Hong Kong’ (Oxford University Press, 1999), as well as numerous papers in internationally refereed journal outlets.


Speaker information

Professor Paul B McGuinness,CUHK Business School,The Chinese University of Hong Kong

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