SOAS Research Online

A Free Database of the Latest Research by SOAS Academics and PhD Students

[skip to content]

Ferrarini, Benno, Hinojales, Marthe and Scaramozzino, Pasquale (2017) 'Chinese Corporate Leverage Determinants.' Journal of Asian Finance Economics and Business, 4 (1). pp. 5-18.

[img]
Preview
Text - Published Version
Available under License Creative Commons Attribution-NonCommercial 4.0 (CC BY-NC 4.0).

Download (260kB) | Preview

Abstract

Total debt in the People’s Republic of China surged to nearly 290% as a ratio to GDP by the second quarter of 2016, mostly on account of non-financial corporate debt. The outpouring of credit to stem the impact of the global financial crisis accentuated industrial overcapacity in traditional sectors, such as steel, cement, and energy, while feeding asset bubbles in the property, equity and bond markets. At the Chinese corporate level, this has translated into weakened fundamentals and a fall in industrial profits, particularly of SOEs. As debtors struggle to service interest payments, non-performing loans (NPLs) have been on the rise. This paper assesses the financial fragility of the Chinese economy by looking at risk factors in the non-financial sector. We apply quantile regressions to a dataset containing all Chinese listed companies in Standard & Poor’s IQ Capital database. We find higher sensitivity over time of corporate leverage to some of its key determinants, particularly for firms at the upper margin of the distribution. In particular, profitability increasingly acts as a curb on corporate leverage. At a time of falling profitability across the Chinese non-financial corporate sector, this eases the brake on leverage and may contribute to its continuing increase.

Item Type: Journal Article
Keywords: corporate debt, People’s Republic of China, debt sustainability, panel quantile regression
SOAS Departments & Centres: Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management
Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management > Centre for Financial and Management Studies (CeFiMS)
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HG Finance
ISSN: 22884637
DOI (Digital Object Identifier): https://doi.org/10.13106/jafeb.2017.vol4.no1.5
Date Deposited: 06 Feb 2017 09:10
URI: https://eprints.soas.ac.uk/id/eprint/23602
Related URLs: http://www.jafeb.org/ (Publisher URL)

Altmetric Data

Statistics

Download activity - last 12 months
Downloads since deposit
652Downloads
800Hits
Accesses by country - last 12 months
Accesses by referrer - last 12 months

Repository staff only

Edit Item Edit Item