Corporate deleveraging and financial flexibility: a Chinese case-study

Karen Lai, Ashna Prasad, George Wong, Iliyas Yusoff

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)


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.

Original languageEnglish
Article number101299
Number of pages9
JournalPacific Basin Finance Journal
Publication statusPublished - Jun 2020


  • Corporate deleveraging
  • Financial flexibility
  • Life cycle
  • State-owned enterprises

Cite this