Buffer or substitute? Corporate financialization and leverage manipulation

Yinchao Liao, Jun Wang, Wenru Liao, Xiaoyang Shu and Zhiyong Li

Pacific-Basin Finance Journal, 2024, vol. 87, issue C

Abstract: This study examines the impact of financialization on leverage manipulation for nonfinancial companies in China from 2011 to 2021. Using the XLT-LEVM measurement method, we find that corporate financialization can inhibit leverage manipulation. Mechanism analysis suggests that corporate financialization deters leverage manipulation by crowding out debt financing in a substantive way. According to heterogeneity analysis, the inhibitory effect is less pronounced in firms with short-term solvency pressure and intensive external attention. Our findings extend the literature on corporate financialization and demonstrate its role in mitigating leverage manipulation, with implications for both financial practice and public policy.

Keywords: Corporate financialization; Leverage manipulation; Precautionary saving; Speculative motive (search for similar items in EconPapers)
JEL-codes: G11 G32 G34 G38 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:87:y:2024:i:c:s0927538x24002609

DOI: 10.1016/j.pacfin.2024.102508

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