Political motives of excess leverage in state firms

Oleksandr Talavera (), Shuxing Yin and Mao Zhang

International Review of Financial Analysis, 2024, vol. 94, issue C

Abstract: This study explores the political motives behind the enormous indebtedness of Chinese state firms. To measure the excess leverage of state firms, the difference between actual and predicted values, we balance the samples of private and state firms by matching and using the former sample to generate an out-of-sample prediction for the latter. Our results suggest that the excessive indebtedness of state firms positively relates to regional unemployment pressure and economic pressure faced by municipal politicians. These effects are more pronounced in local state firms and when local officials have stronger promotion incentives. Our paper provides evidence that government control leads to significant political influence over the real decisions of firms.

Keywords: Excess leverage; State firms; Political motives; Unemployment and economic pressure (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521924000875
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:94:y:2024:i:c:s1057521924000875

DOI: 10.1016/j.irfa.2024.103155

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 ().