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Reverse mixed ownership reform: Does state-owned capital injection inhibit corporate leverage manipulation?

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  • Zhu, Ruoyu
  • Xin, Xiaohui
  • Tan, Kehu

Abstract

Existing studies have focused disproportionately on the impact of mixed ownership reform while ignoring the influence of reverse mixed ownership reform. Considering this, we explore the effects of the latter on corporate leverage manipulation. We find that state-owned capital injection can inhibit corporate leverage manipulation, and the possible mechanisms are the “resources effect” and the “governance effect” inherited from state-owned shares, i.e., state-owned capital participation can restrain corporate leverage manipulation by weakening the induced effect of financing constraints and enhancing the inhibitory effect of corporate governance on firms’ leverage manipulation. Heterogeneity analysis shows that the inhibitory effect of state-owned capital injection on leverage manipulation is more pronounced in firms with state-owned equity shareholdings of no more than 50 % and in capital-intensive industries. Furthermore, state-owned capital injections can significantly reduce firms' bankruptcy risk after curbing corporate leverage manipulation.

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  • Zhu, Ruoyu & Xin, Xiaohui & Tan, Kehu, 2024. "Reverse mixed ownership reform: Does state-owned capital injection inhibit corporate leverage manipulation?," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011364
    DOI: 10.1016/j.frl.2023.104764
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    Cited by:

    1. Li, Wentao & Li, Xue & Peng, Lanying & Ning, Chong, 2024. "Silent actions: Digital transformation in private enterprises with state equity participation," Finance Research Letters, Elsevier, vol. 65(C).

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