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Are group control associated with excess leverage? Empirical evidence

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  • Yulan Wang
  • Xiaochen Dou
  • Jinglin Li

Abstract

This study investigates the effect of group control on the excess leverage of Chinese listed firms during 2003–2016. We find that the extent and probability of excess leverage in group-affiliated firms are significantly higher than stand-alone firms. After considering the firm ownership, we find that the excess leverage is more pronounced among private group-affiliations than the state-owned ones. Moreover, the empirical evidence indicates that better corporate governance and efficient institutional environment can effectively decrease the degree of excess leverage in group-affiliated firms. This paper provides a new perspective for understanding the over-leverage problem of Chinese firms and offers practical implications for the implementation of de-leverage policy.

Suggested Citation

  • Yulan Wang & Xiaochen Dou & Jinglin Li, 2019. "Are group control associated with excess leverage? Empirical evidence," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 7(1), pages 1-24, January.
    • Handle: RePEc:taf:rcjaxx:v:7:y:2019:i:1:p:1-24
    DOI: 10.1080/21697213.2019.1635322
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    Cited by:

    1. Duan, Yuejiao & Liu, Lanbiao & Zhang, Jingjia, 2024. "The belt and road initiative and the over-leverage of securities companies," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    2. Chu Wang & Char-Lee Lok & Lian Kee Phua, 2023. "Ownership Structure and Capital Structure: Moderating Effect of Product Market Maturity," SAGE Open, , vol. 13(4), pages 21582440231, December.

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