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Raising short-term debt for long-term investment and stock price crash risk: Evidence from China

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  • Cheng, Feiyang
  • Chiao, Chaoshin
  • Fang, Zhenming
  • Wang, Chunfeng
  • Yao, Shouyu

Abstract

The purpose of this paper is to investigate the impact of raising short-term debt for long-term investment (SDFLI) on stock price crash risk. Using data from China's stock market, this paper provides insights not only on the consequences of SDFLI but also the underlying channels through which SDFLI affects crash risk. Evidence shows that SDFLI leads to less information disclosure, higher information risk, and lower information transparency, which eventually exacerbates future crash risk. Moreover, the effect of SDFLI on crash risk is affected by firm characteristics, monitoring mechanisms, and economic environment.

Suggested Citation

  • Cheng, Feiyang & Chiao, Chaoshin & Fang, Zhenming & Wang, Chunfeng & Yao, Shouyu, 2020. "Raising short-term debt for long-term investment and stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319300972
    DOI: 10.1016/j.frl.2019.05.018
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    More about this item

    Keywords

    Short-term debt for long-term investment; Crash risk; China's stock market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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