EconPapers    
Economics at your fingertips  
 

Does the Achilles heel of guarantee networks drive financial distress?

Yuan George Shan, Yirui Wang, Wuqing Wu and Weihao Zhen

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: To explore characteristics of guarantee networks that drive financial distress, we use a dataset comprising 20,467 firm-year observations from Chinese companies listed on the Shanghai and the Shenzhen Stock Exchanges to construct networks from 85,229 guarantee relationships. We show that guarantee networks have a negative effect on company financial distress, revealed by cash holdings and long-term liabilities. Larger networks, those with an Achilles heel, and companies with high closeness centrality exacerbate this effect, and companies in a stronger financial position suffer greater negative impacts. Guarantee networks may also exert their negative impact by acting as a channel for shareholder tunneling.

Keywords: Achilles heel; Debt repayment; Financial distress; Guarantee network; Shareholder tunneling (search for similar items in EconPapers)
JEL-codes: C88 G32 M41 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521923001515
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001515

DOI: 10.1016/j.irfa.2023.102635

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-12-28
Handle: RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001515