IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v155y2026ics0264999325004274.html

When the bordering levee breaks: The impact of floods on corporate financialization in China

Author

Listed:
  • Wu, Ziqing
  • Chen, Leyi
  • Shi, Lingpeng

Abstract

This paper investigates the impact of floods on corporate financialization in China. We find that flood shocks significantly increase corporate financialization by firms in non-disaster areas within the same prefecture-level city. Mechanism analysis shows that lower financing costs and expanded financing sizes are the main drivers. This suggests that local governments reallocate resources to support unaffected regions during adverse shocks, yet part of this support is channeled into financial assets rather than productive investments. Further analysis indicates that this effect is more pronounced with the severity of floods and for large firms. Our findings reveal a critical unintended consequence of government intervention in disaster response, highlighting the need for policy designs that guard against such financial resource misallocation. This study enriches our understanding of how adverse shocks affect corporate financial strategies.

Suggested Citation

  • Wu, Ziqing & Chen, Leyi & Shi, Lingpeng, 2026. "When the bordering levee breaks: The impact of floods on corporate financialization in China," Economic Modelling, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s0264999325004274
    DOI: 10.1016/j.econmod.2025.107432
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999325004274
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2025.107432?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s0264999325004274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.