The Influence of Legal Person Ownership on Leverage and Financing Costs in Chinese Listed Companies

This study investigates the impact of legal person shareholding on the capital structure of Chinese listed firms. Using panel data from 2004 to 2018 covering companies listed on the Shanghai and Shenzhen Stock Exchanges, the analysis explores how the concentration of legal person ownership influences firms’ leverage and cost of debt. Employing fixed effects regression models with robust standard errors, the results reveal a significant negative relationship between legal person shareholding and firm leverage, indicating that firms with higher proportions of legal person ownership are less likely to use debt financing. Further analysis demonstrates that this effect operates through an increase in the cost of borrowing, suggesting that concentrated legal person ownership heightens information asymmetry between major and minority shareholders, thereby raising financing costs. The findings are robust across multiple leverage measures and sensitivity tests. This study contributes to the literature on corporate ownership and capital structure in China by highlighting the unique role of legal person shareholders, who act as both monitors and dominant stakeholders. The results provide valuable insights for policymakers, investors, and financial managers regarding ownership structure, agency dynamics, and financing strategies in emerging market contexts.