Leverage, technical efficiency and profitability: An application of DEA to foreign-invested toy manufacturing firms in China

Wai Kwong Mok, Godfrey Yeung, Zhaozhou Han, Zongzhang Li

Research output: Journal article publicationJournal articleAcademic researchpeer-review

21 Citations (Scopus)


Based on a representative sample of the 238 largest foreign-invested toy manufacturing firms in southern China by output value, we adopted a two-stage approach to examine the role of leverage on firm performance as measured by technical efficiency, and the effect of efficiency on profitability. In the first stage, we use data envelopment analysis (DEA) to estimate the technical efficiency of the sample firms. In the second stage, we conduct a regression analysis to study the effects of leverage on efficiency and of efficiency on profitability. Our empirical results support the view that leverage has a positive effect on firm technical efficiency and that there is a positive relationship between technical efficiency and profitability.
Original languageEnglish
Pages (from-to)259-274
Number of pages16
JournalJournal of Contemporary China
Issue number51
Publication statusPublished - 1 May 2007

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Political Science and International Relations

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