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Corporate financialization and the long-term use of short-term debt: Evidence from China

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  • Chen, Yan
  • Sun, Ruiqi

Abstract

Using data from Chinese A-share listed companies from 2007 to 2022, we investigate the impact of financialization on the long-term use of short-term debt (LUSD). The results indicate that greater financialization leads to increased utilization of LUSD. The rise of financialization has reduced equity financing and long-term bond financing for firms, pushing them towards using short-term loans instead of long-term investments. Furthermore, the impact of financialization on LUSD is amplified by both rising financing costs and a higher degree of financing constraints. Our study additionally establishes that enterprises with smaller scale, shorter operating periods and greater operational risk are more likely to be impacted by financialization and, hence, show an increased utilization of LUSD.

Suggested Citation

  • Chen, Yan & Sun, Ruiqi, 2023. "Corporate financialization and the long-term use of short-term debt: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009741
    DOI: 10.1016/j.frl.2023.104602
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    Keywords

    Financialization; Debt maturity structure; Corporate finance; Capital structure;
    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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