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Impact of social insurance contribution burden on corporate debt financing: mechanisms and microeconomic consequences

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  • Wang, Yutong
  • Wang, Zengwen

Abstract

As China’s social insurance system continues to evolve, the burden of social insurance contributions has increasingly become a significant form of institutional cost that shapes firms’ resource allocation and financing practices. Using panel data from Chinese nonfinancial A-share listed firms that spans 2010–2024, this study examines the impact of social insurance contribution burden on the scale of corporate debt financing and constructs a mechanism framework from internal financing capacity, external financing capacity, and capital deepening perspectives. The empirical results reveal that heavier social insurance contribution burdens significantly increase firms’ debt financing, which primarily operates through reduced internal financing capacity, improved external financing conditions, and strengthened capital deepening. Moreover, although a higher contribution burden may temporarily ease liquidity pressure, it ultimately weakens firms’ future profitability by amplifying leverage expansion. This study provides new micro-level evidence on how institutional costs influence corporate financing decisions and offers meaningful policy implications for optimizing social insurance contribution policies and alleviating firms’ financing pressures.

Suggested Citation

  • Wang, Yutong & Wang, Zengwen, 2026. "Impact of social insurance contribution burden on corporate debt financing: mechanisms and microeconomic consequences," Finance Research Letters, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:finlet:v:92:y:2026:i:c:s1544612326000577
    DOI: 10.1016/j.frl.2026.109526
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