The role of internally financed capex in rising Chinese corporate debts
Guonan Ma and
No GRU_2019_003, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit
Our paper aims to understand potential drivers behind China’s rising corporate leverage, using an international aggregate panel dataset. We find strong evidence of significantly negative effects of the internally financed share of capex on the change of corporate debt/GDP: a rise in corporate earnings relative to corporate investment consistently slows corporate debt buildup. This finding is robust to choices of benchmark models, control variables, and data samples. Our regressions also confirm more important roles played by real economic factors than monetary factors. While the investment rate contributes to rising corporate debt, a higher saving rate dampens corporate leveraging. Finally, we find some evidence of consistently negative impacts of government debt on corporate leveraging, suggesting possible interactions between corporate and government debts.
Keywords: Corporate Debt; Corporate earnings; Internal financing; Capital expenditure; China (search for similar items in EconPapers)
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Published in Comparative Economic Studies, available on 17 June 2019
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Journal Article: The Role of Internally Financed Capex in Rising Chinese Corporate Debts (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2019_003
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