Debt capacity, debt choice, and underinvestment problem
Evidence from China
Bibliographic Data
| ID | 15067166 |
|---|---|
| Authors | Kalim-Ullah Bhat (Dongbei University of Finance and Economics), Kalimullah Bhat (Dongbei University of Finance and Economics), Shihua Chen (0000-0001-7766-8859, Dongbei University of Finance and Economics), Yan Chen (0000-0003-4119-9688, Dongbei University of Finance and Economics), Khalil Jebran (0000-0003-0594-4775, Dongbei University of Finance and Economics, corresponding author) |
| Year | 2020 |
| Volume | 33 |
| Issue | 1 |
| Pages | 267-287 |
| Publication date | 2020-01-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economic Research-Ekonomska Istraživanja (JOURNAL) |
| Journal identifiers | ISSN: 1331-677X • E-ISSN: 1848-9664 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/1331677x.2019.1699438 |
| OpenAlex | W3007112719 |
| Language | EN |
| Citations received | 2 |
| References cited | 56 |
This study investigates how short-term debt and debt capacity help firms to make efficient financing decisions and reduce underinvestment problem. The sample includes Chinese nonfinancial firms listed on the Shanghai and Shenzhen Stock Exchanges over the period 2007 to 2017. The findings indicate that short-term debt is positively related to leverage. The results also indicate that growth positively influences leverage. The results further show that short-term debt enhances the positive impact of growth on leverage. These findings reveal that short-term debt makes firms financially flexible, and allows them to obtain more cost-effective debt by repricing and renegotiation of debt contracts in the presence of valuable growth opportunities. Furthermore, the results illustrate that debt capacity is positively associated with leverage, suggesting that debt capacity helps firms to have an easy access to the credit market and reduce liquidity risk. Overall, the findings remain consistent across different types of firms (state-owned [S.O.E.] and non-state-owned enterprises [N.S.O.E.]) and by considering alternative proxy of growth
Business · Debt · Debt levels and flows · Debt ratio · Debt-to-GDP ratio · Economics · External debt · Internal debt · Market liquidity · Monetary economics · Recourse debt · Corporate Finance and Governance · Financial Reporting and Valuation Research · Working Capital and Financial Performance · Finance
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| Unique citing works | 2 |
|---|---|
| Citations per year | 0,33 |
| Citation span | 2020 - 2022 (3) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 2 |