Does household leverage affect corporate innovation? Evidence from China

Shiqin Su, Guoan Zeng, Yijun Zhou and Dongyu Liu

Applied Economics Letters, 2024, vol. 31, issue 20, 2085-2090

Abstract: This study examines the effect of household leverage on corporate innovation. Using the dynamic threshold model to the macro-level data from China’s 31 provinces and municipalities and micro-level data from non-financial A-shared listed firms during the period 2007–2019, we find complex nonlinear effects of household leverage on corporate innovation. Only at certain intervals can household leverage plays a vital role in facilitating corporate innovation. We also confirm that increased debt risk and enhanced financialization can account for the weakening of the positive impact. Furthermore, heterogeneity analysis shows that the positive effect of household leverage on corporate innovation significantly weakens above the threshold value in the eastern region, high-tech industries, and SOEs. In contrast, the effect exhibits the opposite that turns negative to positive in the central and western regions, non-high-tech industries, and non-SOEs.

Date: 2024
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DOI: 10.1080/13504851.2023.2210811

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