State of demand and excessive indebtedness: Evidence from Chinese listed manufacturing firms

Wei Sun, Danqing Geng and Kaiqiang Dong

Finance Research Letters, 2021, vol. 42, issue C

Abstract: This paper provides new evidence about how demand affects debt financing decisions of manufacturing firms in China. The results show that demand and price have a positive impact on total and net new liabilities in a highly expanding state, which however are negatively correlated with total liabilities but unrelated to net new liabilities in a contraction. The findings indicate that firms are driven to increase their debt levels actively in an expansion due to the rise of demand and price, however the shrinking demand and price worsening solvency will lead to a passive increase of debts in a contraction.

Keywords: State of demand; Excessive indebtedness; Deleveraging policy; China (search for similar items in EconPapers)
JEL-codes: C33 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321000234

DOI: 10.1016/j.frl.2021.101942

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