Heterogeneous Debt Financing and Share Return Volatility

Xiaobao Song and Wunhong Su ()
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Xiaobao Song: Business School, Shantou University, Shantou, Guangdong, China
Wunhong Su: School of Accounting, Hangzhou Dianzi University, 1158, No.2 Street, Xiasha Higher Education Zone, Hangzhou, Zhejiang 310018, China.

Journal for Economic Forecasting, 2022, issue 1, 85-105

Abstract: The debt financing of Chinese listed firms includes trade credit and bank credit. This study empirically investigates the impact of different debt financings on the share return volatility and examines whether there exists the heterogeneous corporate governance effect by two different debt financings. This study finds that trade credit debt financing decreases the risk of share return volatility. The trade-credit debt financing plays a good monitoring role in the investing behavior of firms and alleviates the agency conflict between shareholders and creditors. The bank credit debt financing increases the risk of share return volatility, indicating that the bank credit debt financing has difficulty playing a good monitoring role on the firm and deteriorates the agency conflict between shareholders and creditors. The finding provides a new analytical perspective for investigating investment and financing interaction

Keywords: debt financing; share volatility; trade credit debt financing; bank credit debt financing; China (search for similar items in EconPapers)
JEL-codes: G21 G32 M41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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