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Heterogeneous Debt Financing and Share Return Volatility

Author

Listed:
  • Xiaobao SONG

    (Business School, Shantou University, Shantou, Guangdong, China)

  • Wunhong SU

    (School of Accounting, Hangzhou Dianzi University, 1158, No.2 Street, Xiasha Higher Education Zone, Hangzhou, Zhejiang 310018, China.)

Abstract

The debt financing of Chinese listed firms includes trade credit and bank credit. This study empirically investigates the impact of different debt financings on the share return volatility and examines whether there exists the heterogeneous corporate governance effect by two different debt financings. This study finds that trade credit debt financing decreases the risk of share return volatility. The trade-credit debt financing plays a good monitoring role in the investing behavior of firms and alleviates the agency conflict between shareholders and creditors. The bank credit debt financing increases the risk of share return volatility, indicating that the bank credit debt financing has difficulty playing a good monitoring role on the firm and deteriorates the agency conflict between shareholders and creditors. The finding provides a new analytical perspective for investigating investment and financing interaction

Suggested Citation

  • Xiaobao SONG & Wunhong SU, 2022. "Heterogeneous Debt Financing and Share Return Volatility," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 85-105, April.
    • Handle: RePEc:rjr:romjef:v::y:2022:i:1:p:85-105
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    References listed on IDEAS

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    Cited by:

    1. Li, Hong-Quan & Yang, Yang & Xue, Feng-Wan & Liu, Zhi-Yi, 2024. "Annual report readability and trade credit financing: Evidence from China," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. Peisen LIU & Shiqi Chen & Yufeng XIA, 2023. "The Effect of Bank Competition and Rural Banks on Wages: Evidence from Agricultural Firms," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 5-24, December.

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    More about this item

    Keywords

    debt financing; share volatility; trade credit debt financing; bank credit debt financing; China;
    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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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