Does the SOEs deepening reform mitigate firms’ short-term debt for long-term use? Evidence from China

Optimizing the capital structure is one of the important contents of the implementation of the SOEs deepening reform. The goal of strengthening, optimizing, and expanding state-owned enterprises is to some extent constrained by the capital structure. From the perspective of short-term debt for long-term use, this paper uses the ‘Slimming Work Plan of Central SOEs Deepening Reform’ in 2016 as a natural experimental event. By the data from Chinese A-share listed companies from 2011 to 2020, the paper systematically examines the impact and economic consequences of this reform on short-term debt for long-term use of SOEs. The research results find that the reform has significantly reduced the level of short-term debt for long-term use of SOEs. Moreover, the cross-sectional inspection results indicate that this effect is more pronounced in SOEs with weak internal control, poor information environment, and high degree of diversification. This paper not only supplements the relevant research on the economic consequences of state-owned enterprise reform but also expands the literature on the influencing factors of firms’ short-term debt for long-term use.