Political motives of excess leverage in state-owned firms
Shuxing Yin and
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Shuxing Yin: University of Sheffield
Mao Zhang: University of St Andrews
Discussion Papers from Department of Economics, University of Birmingham
This study explores the political motives of excess leverage in state-owned firms. To measure the excess leverage, we follow Gao et al. (2013) to estimate how state firms would behave if they were non-state firms. Using a panel of Chinese firms, we find that, on average, state firms take excess leverage (i.e., overleveraged) compared to otherwise similar non-state firms. Examining the determinants of such leverage difference, our results suggest that the excess leverage of state-owned firms positively relates to regional unemployment pressure and economic pressure faced by municipal politicians. Such effects are more pronounced in local state-owned firms. Our paper provides evidence that government control leads to significant political influence over the real decisions of firms.
Keywords: excess leverage; state-owned firms; political motives; unemployment and economic pressure (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Pages: 38 pages
New Economics Papers: this item is included in nep-cfn, nep-pol and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:22-04
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