Can debt overhang help explain the declining growth rate of investment in China?. Issue 2 (19th January 2020)

• Record Type: Journal Article
• Authors: Liu, Lili; Cebula, Richard J.; Foley, Maggie; Peng, Fangping
• Is Part Of: Applied economics letters. Volume 27:Issue 2(2020)
• Page Start: 82
• Page End: 85
• Publication Date: 2020-01-19
• Subjects: Debt overhang -- threshold -- investment; C51 -- G30 -- O11; Economics -- Periodicals; Economics, Mathematical -- Periodicals; 330
• DOI: 10.1080/13504851.2019.1608352
• Languages: English
• ISSNs: 1350-4851

Abstract

ABSTRACT: In this study, we investigate whether debt overhang may contribute to explaining the declining growth rate of investment in China. By using firm-level data, we find a nonlinear firm debt–investment relationship and derive thresholds beyond which debt has a negative and significant impact on investment, which supports the theory of debt overhang.