China’s Leverage Ratio and Systemic Financial Risk Prevention

Ma, Jiantang; Dong, Xiaojun; Shi, Hongxiu; Jie, Xu; Ma, Xiaochen

doi:10.1007/978-981-10-8357-0_4

Cited by 6 publications

(9 citation statements)

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“…Some scholars believe that there is not enough room for residents to increase leverage, and the continued increase in the leverage ratio can easily cause the real economy to shrink (Ho & Hsu, 2010; Ungerer, 2015). Specifically, after the 2008 financial crisis, the government excessively encouraged residents to borrow for consumption, which caused the residents' leverage ratio to increase rapidly (Ma et al, 2019). At present, the total debt of residents has exceeded the disposable income of residents.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Meanwhile, China's macro leverage ratio has risen sharply. According to data from the Bank for International Settlements, China's real sector (including government, residents, and nonfinancial corporations) leverages ratio rose rapidly from 170% in 2008 to 245.4% in 2019, next to developed economies such as Japan, the United Kingdom, and the eurozone and much higher than emerging economies (Ma et al, 2019). But the growth of consumer credit has been significantly accelerated by residents' leverage.…”

Section: Introductionmentioning

confidence: 99%

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Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies

Xie

2023

Manage Decis Econ

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The increase in resident leverage is expected to promote the growth of retail consumption, thereby creating favorable macro conditions for companies to reduce leverage and destock. However, the increase in resident leverage in China has been accompanied by a continuous decline in the growth of retail consumption, which has a negative impact on the external environment of enterprises. The unbalanced panel data of 2218 nonfinancial listed companies in China from 2010 to 2018 were used to investigate the relationship and mechanism between resident leverage and corporate profitability. The empirical results show that the increase in resident leverage has a negative impact on the profitability of Chinese companies. In addition to the direct impact, resident leverage has a transmission mechanism that affects corporate profitability through debt level, degree of financialization, and degree of zombification. In order to avoid the heterogeneity of research results caused by differences in corporate characteristics, the heterogeneity test was conducted by distinguishing the nature of enterprise ownership, innovation input, and financing constraints. The test of the heterogeneity of enterprise ownership shows that residents' increased leverage has a greater restraint on the profitability of state-owned enterprises than private

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies

Xie

2023

Manage Decis Econ

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“…Debt leverage refers to the debt financing of enterprises in their business activities, and for listed companies, there are two main channels of financing: debt financing and equity financing, and once an enterprise has a financial crisis, the risk will spread from the above two channels, and through the accounting linkage of the balance sheet, it will spread to other sectors, triggering systemic financial risk. Ma [4] argues that, compared with developed countries, although China's nominal leverage ratio is not high, the actual potential risk is not small, mainly because there is more hidden debt in China, while the growth rate of debt is also too fast, effectively resolving the high debt leverage ratio and preventing systemic financial risks,, is currently the top priority of China's financial supervision. From the perspective of debt rollover, Zhang Yilin [5] examines the mechanism of economic uncertainty on banks' debt rollover decisions and corporate leverage, arguing that banks' persistent increase in debt to insolvent enterprises to expand debt leverage will exacerbate economic uncertainty and will expand the potential for systemic financial crisis to occur.…”

Section: Literature Reviewmentioning

confidence: 99%

Study on the Impact of Fintech and Debt Leverage on Systemic Financial Risk Transmission Mechanism

Dong¹,

Xiao²,

Li³

2021

Proceedings of the 2021 International Conference on Economic Development and Business Culture (ICEDBC 2021)

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This paper analyzes the contagion mechanism of systemic financial risk from the perspectives of fintech and debt leverage, and the analysis results show that the impact of fintech development on the occurrence of systemic financial risk is both exacerbated and mitigated. The mitigating effect is mainly in the reduction of information asymmetry and the upgrading of risk forecasting indicators; at the same time, excessive debt leverage can also lead to systemic risk due to the correlation between different sectors of the economy. The paper concludes with recommendations based on the findings.

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“…The first, there is an inverse relationship between the company's own operating efficiency and debt leverage. Ma J et al (2016) found that excessive corporation leverage is closely related to the inefficient use of corporate funds. When an enterprise is inefficient and has overcapacity, it can only borrow new debt to pay off the old debt.…”

Section: Enterprise Operations and Corporation Debt Leveragementioning

confidence: 99%

A Review of Research on the Influencing Factors of China’s Corporation Debt Leverage

Lin¹

2020

IJBSS

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Under the background of economic transformation of China, how to adjust the "leverage" and "growth" has become a hot topic of academic research. Existing studies have discussed the issues such as the leverage level, leveragestructure and impact of China 's financial stability. This article mainly analyzes the influencing factors and research methods of corporationdebt leverage, and introduces the chain reaction of corporation debt sustainability and financial stability. The formation of the structural characteristics of Chinese corporation debt leverage is complex,in the process of steady adjustment, a structural approach should also be used, especially in the context of financial deepening. Researches on the relationship between debt leverage and economic growth needs to pay more attention to the efficiency of corporate capital output and debt sustainability.

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China’s Leverage Ratio and Systemic Financial Risk Prevention

Cited by 6 publications

References 1 publication

Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies

Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies

Study on the Impact of Fintech and Debt Leverage on Systemic Financial Risk Transmission Mechanism

A Review of Research on the Influencing Factors of China’s Corporation Debt Leverage

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