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Xiaofen TAN: Financial Structure and Non-financial Corporate Deleveraging

Published:2019-04-10  Views:

Abstract:This paper employs paneldata of non-financial corporates in 47 countries and areas from 2000 to 2015and two-way fixed-effect model toinvestigate the relationshipbetween financial structure and corporate leverage. The results show that thereis a significant negative relationship between financialstructure and corporate leverage. On average, 1% increase in the degreeofmarketization of financial structure will leadcorporateleverage to decline 0.44% while increasingcorporate debt maturity. Furthermore, this effect will showsignificant heterogeneity among different countries or regions,industries and enterprises. This effect is more pronounced for firms in thecountries or regions withless reliance on investment as a proportionof GDP, higher level of financialdevelopment, more perfectregulation quality, more transparent information disclosure and for firms inthe innovation industry. For firms with high leverage ratio, large size, poorprofitability, low ownership concentration and weak political connection, themarketization of financial structure plays a more significant role indeleveraging. Meanwhile, at the macro level, the government should change themode of economic growth, promote the transformation of economic structure,strengthen supervision and improve the information disclosure system; at the micro level, improve the corporate governance structure andreduce the degree of government intervention in enterprises.

Key Words:Financial Structure;Non-financial CorporateLeverage;Deleveraging;Financial Development

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