Are group control associated with excess leverage? Empirical evidence

Yulan Wang, Xiaochen Dou and Jinglin Li

China Journal of Accounting Studies, 2019, vol. 7, issue 1, 1-24

Abstract: This study investigates the effect of group control on the excess leverage of Chinese listed firms during 2003–2016. We find that the extent and probability of excess leverage in group-affiliated firms are significantly higher than stand-alone firms. After considering the firm ownership, we find that the excess leverage is more pronounced among private group-affiliations than the state-owned ones. Moreover, the empirical evidence indicates that better corporate governance and efficient institutional environment can effectively decrease the degree of excess leverage in group-affiliated firms. This paper provides a new perspective for understanding the over-leverage problem of Chinese firms and offers practical implications for the implementation of de-leverage policy.

Date: 2019
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DOI: 10.1080/21697213.2019.1635322

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