Corporate governance quality and financial leverage: Evidence from China

By Mengling Zhou, Kexin Li, Zhongfei Chen. 2020

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Abstract This study explores the ways of how corporate governance quality affects firms' financial leverage using a panel sample of non-financial listed firms in China during 2000–2018. Empirical results indicate that improved corporate governance quality has a robust and negative effect on financial leverage for the full sample and subsample by ownership, industry, scale, etc. This negative effect is mediated by corporate internal and equity financing. Furthermore, in terms of the corporate performance, we show that financial leverage significantly reduces financial performance, especially during the economic downturn, and it could be offset by the improved corporate governance quality.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/2cac46f2336a77d8322dfadf8c340e43434495e3