Commonality in liquidity and corporate default risk - Evidence from China

Yumei Fu, Feng He, Jintian Li and Bingyan Zan

Research in International Business and Finance, 2024, vol. 69, issue C

Abstract: We investigate the impact of commonality in liquidity on corporate default risk. Using the sample of Chinese A-share listed companies from 2009 to 2019, we find that commonality in liquidity significantly increases corporate default risk. This effect is achieved by increasing firm’s financial constraints and reducing the firm’s solvency. We further find state ownership, information disclosure, institutional investors’ shareholding, audit supervision, prefecture level marketization process and digital finance development can weaken the impact of commonality in liquidity on corporate default risk.

Keywords: commonality in liquidity; default risk; financing constraints; solvency (search for similar items in EconPapers)
JEL-codes: G30 G33 G34 M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000734

DOI: 10.1016/j.ribaf.2024.102280

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