EconPapers    
Economics at your fingertips  
 

The Role of Internally Financed Capex in Rising Chinese Corporate Debts

Guonan Ma () and Jinzhao Chen
Additional contact information
Guonan Ma: About Capital Management

Comparative Economic Studies, 2019, vol. 61, issue 3, 413-442

Abstract: Abstract This paper aims to identify potential drivers behind China’s rising corporate leverage, using an international aggregate panel dataset. We find strong evidence of significantly negative effects of the internally financed share of capital expenditure on the change of corporate debt/GDP: a rise in internally generated funds relative to gross capital formation consistently slows corporate debt buildup. While our core finding is robust to choices of benchmark models, control variables and data samples, this negative effect appears more pronounced in China’s case. Our regressions also suggest more important roles played by real economic factors than monetary factors. While the investment rate contributes to rising corporate debt, a higher saving rate dampens corporate leveraging. Finally, we present some evidence of consistently negative impacts of government debt on corporate leveraging, suggesting possible interactions between corporate and government debts. Overall, our empirical evidence points to the declining investment efficiency as a possible important driver behind China’s high and rising corporate leverage, in light of its high investment rate and low internally funded capex ratio.

Keywords: Corporate debt; Corporate earnings; Internal financing; Capital expenditure; China (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41294-019-00096-x Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The role of internally financed capex in rising Chinese corporate debts (2019) Downloads
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:pal:compes:v:61:y:2019:i:3:d:10.1057_s41294-019-00096-x

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41294/PS2

Access Statistics for this article

Comparative Economic Studies is currently edited by Nauro Campos

More articles in Comparative Economic Studies from Palgrave Macmillan, Association for Comparative Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-11-26
Handle: RePEc:pal:compes:v:61:y:2019:i:3:d:10.1057_s41294-019-00096-x