TY - JOUR
T1 - Corporate deleveraging and financial flexibility
T2 - a Chinese case-study
AU - Lai, Karen
AU - Prasad, Ashna
AU - Wong, George
AU - Yusoff, Iliyas
PY - 2020/6
Y1 - 2020/6
N2 - Using a firm-by-firm longitudinal approach, we find that highly levered firms in the United States and China systematically deleverage to restore financial flexibility over a median six-year period. In the Chinese context, the deleveraging period from the market leverage peak to trough is five years for non-state owned enterprises (non-SOEs) and developing firms, and seven years for SOEs and mature firms. Non-SOEs and developing firms are less capable of restoring financial flexibility than their SOE and mature firm counterparts. Debt repayment is the main contributor to the deleveraging process for both Chinese and US firms. Share issuance contributes more than the retained earnings in the deleveraging process for Chinese firms.
AB - Using a firm-by-firm longitudinal approach, we find that highly levered firms in the United States and China systematically deleverage to restore financial flexibility over a median six-year period. In the Chinese context, the deleveraging period from the market leverage peak to trough is five years for non-state owned enterprises (non-SOEs) and developing firms, and seven years for SOEs and mature firms. Non-SOEs and developing firms are less capable of restoring financial flexibility than their SOE and mature firm counterparts. Debt repayment is the main contributor to the deleveraging process for both Chinese and US firms. Share issuance contributes more than the retained earnings in the deleveraging process for Chinese firms.
KW - Corporate deleveraging
KW - Financial flexibility
KW - Life cycle
KW - State-owned enterprises
UR - http://www.scopus.com/inward/record.url?scp=85081267849&partnerID=8YFLogxK
U2 - 10.1016/j.pacfin.2020.101299
DO - 10.1016/j.pacfin.2020.101299
M3 - Article
AN - SCOPUS:85081267849
SN - 0927-538X
VL - 61
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
M1 - 101299
ER -