Abstract: There are two special debt thresholds of 70% and 20% in China under the restrain of the requirements on IPO application by CSRC. Taking 9860 “A” share listed companies from 2001 to 2010 in China as samples for the study, this paper finds out that when the debt ratio is below 20%, long-term debts or bank loans would restrict the growth of the companies, resulting in negative impact on the company value. When it is above 70%, due to the soft budget constraints of the creditors, the long-term debts would increase rather than decrease, pushing the irrational high growth of the companies; and the company value would be damaged if banks conniving their high growth with high risks. When the debt ratios are between 20% and 70%, soft budget constraints would be improved; however, the effects of positive governance on debt are still not significant.

Key words: threshold; debt structure; corporate growth; company value