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Digital government and corporate leverage: Evidence from China

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  • Ding, Zifang
  • Qu, Shen
  • Zhou, Shangyao
  • Lu, Siran

Abstract

Corporate leverage is an indicator of economic health, and this topic has attracted a great deal of attention since the international financial crisis of 2008. This paper constructs a model of enterprise decision-making under a digital government and theoretically analyzes how the government digital reform impacts corporate leverage and the mechanism of this impact. Theoretical analysis has previously shown that digital reforms by governments help to ease the information asymmetry between banks and enterprises, which in turn affects the actual economic activities of enterprises. Based on these findings, the “one-stop government service” natural experiment used in this paper and the empirical analysis using a multiphase difference-in-differences (DID) method show that digital government can inhibit the short-term debt financing of enterprises while improving their long-term debt financing. This study further finds that the digital government can improve the level of long-term debt for long-term use, thereby reducing corporate leverage. By enriching the theoretical and empirical research on government digital reform, this paper contributes significant theoretical and practical insights to the literature on corporate leverage in the context of government factors.

Suggested Citation

  • Ding, Zifang & Qu, Shen & Zhou, Shangyao & Lu, Siran, 2024. "Digital government and corporate leverage: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 457-479.
    • Handle: RePEc:eee:ecanpo:v:83:y:2024:i:c:p:457-479
    DOI: 10.1016/j.eap.2024.06.026
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    References listed on IDEAS

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    More about this item

    Keywords

    Digital government; Information asymmetry between banks and enterprises; Deleveraging; Multiphase difference-in-differences method;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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