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Leverage and investment efficiency: Evidence from China's deleveraging policy

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  • Ling, Xiaoting
  • Wu, Wuqing

Abstract

China's Central Government issued a deleveraging policy in 2018 to reduce the leverage of state-owned enterprises (SOEs). This paper takes China's deleveraging policy as an exogenous event and investigates the causal effects of the leverage on investment efficiency. The results show that after the implementation of the deleveraging policy, the decreasing leverage of the Chinese SOEs improves their investment efficiency. This paper contributes to the literature on leverage and investment and will be of interest to the emerging market's policy makers as it provides evidence that government intervention in the market economy can improve resource allocation.

Suggested Citation

  • Ling, Xiaoting & Wu, Wuqing, 2022. "Leverage and investment efficiency: Evidence from China's deleveraging policy," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005559
    DOI: 10.1016/j.frl.2021.102629
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    References listed on IDEAS

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    Cited by:

    1. Xu, Meng & Yang, Zhonghai & Lin, Yu-En & Li, Gaobo, 2024. "Maturity mismatched investment, digital financial inclusion, and digital orientation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. Qiumei Li & Hayat Khan & Zuominyang Zhang & Ling Lin & Ke Huang, 2022. "The Impact of the Belt and Road Initiative on Corporate Excessive Debt Mechanism: Evidence from Difference-in-Difference Equation Model," Sustainability, MDPI, vol. 15(1), pages 1-19, December.
    3. Li, Ao & Chen, Sicen & Zhang, Qihao & Liu, Chengyi, 2023. "The disappearing of firm investment efficiency: From the perspective of the discrepancy between production and consumption prices," Finance Research Letters, Elsevier, vol. 58(PC).

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    More about this item

    Keywords

    Leverage; Investment efficiency; Deleveraging policy;
    All these 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

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