Can debt overhang help explain the declining growth rate of investment in China?

Lili Liu, Richard Cebula (), Maggie Foley and Fangping Peng

Applied Economics Letters, 2020, vol. 27, issue 2, 82-85

Abstract: In this study, we investigate whether debt overhang may contribute to explaining the declining growth rate of investment in China. By using firm-level data, we find a nonlinear firm debt–investment relationship and derive thresholds beyond which debt has a negative and significant impact on investment, which supports the theory of debt overhang.

Date: 2020
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DOI: 10.1080/13504851.2019.1608352

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