 The influence of deleveraging the excessive debt firms on investment efficiencyYu-En Lin, Shi Teng, Teng-Yuan Cheng, Qianqian Wang and Chunyang Hu Economic Analysis and Policy, 2024, vol. 84, issue C, 2130-2149 Abstract: Under China's deleveraging policy scenario, this study analyzes the deleveraging effect of excessive leverage firms on investment efficiency and the influence of arbitrage risk on the deleveraging effect. The results show that deleverage lowers over-investment and, to some extent, alleviates under-investment. Deleverage can further bolster corporate performance while boosting investment efficiency. In addition, arbitrage risk in the capital market negatively moderates the impact of deleveraging on investment efficiency, specifically through the transaction cost mechanism. Arbitrage risk weakens the deleveraging effect on investment efficiency mainly through managerial catering to short-term investor sentiment. This study provides capital structure literature with new evidence by examining whether deleveraging to the firms’ expected capital structure influences investment efficiency. We also provide evidence that capital markets moderate the deleveraging effect by arbitrage risk. Keywords: Deleverage; Investment efficiency; Arbitrage risk; Capital structure; Excessive debt (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:84:y:2024:i:c:p:2130-2149 DOI: 10.1016/j.eap.2024.10.013 Access Statistics for this article Economic Analysis and Policy is currently edited by Clevo Wilson More articles in Economic Analysis and Policy from Elsevier |
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