Credit term structure and corporate indebtedness

Abstract

At present, one of the major issues that seriously plague the high-quality development of the real economy globally is the current prevalence of high indebtedness and high leverage, as well as the financing problems of manufacturing enterprises. This paper empirically investigates the extent of the impact of bank credit term structure on corporate indebtedness and its mechanism using Chinese provincial panel data from 2003-2020 as the research sample. The results show that, firstly, long-term bank credit term structure can reduce corporate liabilities and mitigate corporate liability risks, and this result still holds after endogeneity analysis and robustness tests such as lagging credit term structure by one period, using instrumental variable method, and replacing explanatory variables. Second, income effect and innovation effect are two important mechanisms by which credit term structure affects corporate liabilities. Finally, the heterogeneity results show that the credit term structure of firms in the central and western regions has a more pronounced effect on corporate indebtedness than in the eastern regions. Therefore, this paper suggests optimizing the credit term structure, promoting the effective support of credit for the sustainable development of the real economy, taking full account of regional differences, and creating a more favorable environment for enterprise financing and development.