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Common ownership between banks and firms and corporate leverage adjustment speed: Evidence from China

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  • Hu, Jikong
  • Liu, Haiming
  • Chiang, Yao-Min

Abstract

In developed countries and many transitional economies, common ownership between banks and firms (COBF) constitutes a significant channel of bank-firm linkage. Drawing on the Chinese context, this paper investigates how COBF affects corporate leverage adjustment speed. The findings indicate that COBF can accelerate corporate leverage adjustment, and this effect applies to both over-leveraged and under-leveraged firms. Moreover, the impact of COBF on leverage adjustment is more pronounced for firms facing severe financial constraints, high agency costs, and those operating in regions with weaker formal institutions. Specifically, this effect is driven by the reduction of financial constraints and agency issues. Finally, by facilitating faster leverage adjustments, COBF enhances firm performance. Our study contributes to the existing literature on common ownership as well as capital structure theory.

Suggested Citation

  • Hu, Jikong & Liu, Haiming & Chiang, Yao-Min, 2026. "Common ownership between banks and firms and corporate leverage adjustment speed: Evidence from China," Research in International Business and Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:riibaf:v:81:y:2026:i:c:s0275531925004520
    DOI: 10.1016/j.ribaf.2025.103196
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