Jul 2026· Economics & Politics· 0 citations· 51 references
Abstract
China has emerged as the world's largest bilateral creditor to developing countries, yet its effects on sovereign debt outcomes remain contested. Competing theoretical perspectives predict opposing effects: Chinese lending may increase debt vulnerability through opacity, moral hazard, and unsustainable obligations, or reduce it by providing critical financing to countries excluded from traditional capital markets. This study assesses the relationship between Chinese lending and sovereign debt distress using panel data on 152 developing countries from 2000 to 2022. Employing a within‐between Mundlak decomposition and an instrumental variable strategy, we find little evidence that Chinese lending increases debt distress within countries over time. China's loans may actually decrease the risk of debt crises. We find no consistent evidence that Chinese lending increases debt restructuring or IMF funds access. We also find no evidence that Chinese loans increase overall debt burdens, affect countries' ability to service obligations, or lead to riskier fiscal behavior. Our findings suggest that rather than focusing on blame attribution, research should prioritize developing institutional mechanisms to coordinate creditors in managing debt distress in an increasingly fragmented global financial landscape.
Successive global financial and geopolitical shocks have intensified credit market tightness, heightening uncertainty in developer financing, which in turn exposes construction firms reliant on these downstream payments to acute credit shocks. However, this issue has not been sufficiently examined in the existing literature. To address this gap, this study examines the impact of downstream credit shocks on the debt burden of construction firms. Using China’s “Three Red Lines” policy as a quasi-natural experiment and a Difference-in-Differences approach with financial data from listed construction firms, we find that downstream credit shocks significantly increase firms’ debt burdens. Exposed construction firms experience a 13.2% rise in debt-to-asset ratios and an increase of 15.18 billion yuan in debt obligations on average. Drawing on the dynamic capabilities perspective, we show that digital transformation and business diversification mitigate these effects, whereas regulatory violations exacerbate financial distress. Theoretically, this study extends the dynamic capabilities perspective by demonstrating how firm-level organizational conditions shape the effectiveness of firms’ responses to downstream credit shocks. Practically, we suggest that construction firms strategically invest in digital technology, diversify their business portfolios, and maintain strong regulatory compliance to better buffer against the financial contagion along the supply chain.
Zhiwei Liao, Lin Zhu, Yilong Han et al.· Journal of Management in Eng...· 0 citations
This paper aims to investigate how innovation-oriented credit policies affect firm financing behavior in emerging economies, using China’s Promote Sci-Tech and Finance Integration initiative as a quasi-natural experiment.
Using an unbalanced panel of Chinese A-share firms from 2006 to 2020, this study estimates the policy effect with a staggered difference-in-differences (DID) design.
Rather than reducing reliance on informal finance, the policy led to increased use of trade credit, as subsidized loans were diverted along supply chains through receivables and prepayments. The effect is most pronounced among politically unconnected and non-high-tech firms, suggesting a strategic adaptation to credit incentives. Further analysis shows that firms engaged in research and development (R&D) reporting manipulation are more likely to channel funds toward short-term financial intermediation.
These findings highlight how institutional capacity, rather than credit availability alone, determines the success of financial reforms. The study offers broader implications for policy design across Asia-Pacific economies seeking to foster innovation through credit-based interventions.
Qianqian Wang· Journal of Financial Economi...· 0 citations
This study examines the effect of bank competition on corporate investment-financing maturity mismatch, utilizing a panel dataset of 498 listed firms in Vietnam from 2008 to 2024. Bank competition is measured using both structural and non-structural indicators, allowing for a nuanced assessment of market dynamics. The findings reveal a robust positive association between bank competition and maturity mismatch, suggesting that intensified competition leads firms to increase their reliance on short-term debt relative to long-term investment needs. This relationship holds under multiple robustness checks, including alternative variable constructions, fixed effects specifications, crisis period exclusions, and instrumental variable approaches. Mechanism analyses indicate that bank competition affects firms’ debt maturity structures, increasing both the proportion and scale of short-term borrowing. Heterogeneity tests further show that this effect is stronger among firms with higher bank debt dependence, greater financial constraints, and higher borrowing costs, while it is weaker in capital-intensive sectors.
Thi Minh Hue Phan, Japan Huynh· PLoS ONE· 0 citations
This study investigates the impact of public external debt on capital formation in five selected Sub-Saharan African (SSA) countries using panel data from 1990 to 2025. Employing the Generalized Method of Moments (GMM) technique, the analysis reveals a statistically significant and positive relationship between external debt and capital formation. The results indicate that external debt (EXTD), savings rate (SAVR), exchange rate (EXCR), and corruption control (CORR) positively influence capital formation, while trade openness (TROP) and population growth (POPG) have a negative impact. The findings suggest that rising public external debt in SSA countries can drive capital formation and economic growth when channeled towards productive investments. To leverage this opportunity, SSA countries should prioritize effective debt management and direct borrowed funds towards investments that foster economic growth and development. Effective management of public debt and governance reforms are crucial to addressing these challenges and promoting economic growth in SSA.
I. Kubalu, Mohamad Syafiqi Hashim· Journal of Intelligent Decis...· 0 citations
Financing structure is not only a financial decision but also a governance mechanism that shapes managerial behavior and firm outcomes. This study examines how debt and equity financing influence corporate governance efficiency in emerging markets, where institutional enforcement is relatively weak. Drawing upon agency theory and capital structure frameworks, this paper argues that debt can function as a disciplinary device by reducing managerial discretion, whereas equity financing enhances governance through ownership participation and disclosure requirements. Using evidence from emerging economies such as China, Malaysia, and Singapore, prior studies show that firms with higher leverage ratios (above 40%) tend to exhibit improved monitoring but also face rising financial risk. Meanwhile, ownership concentration above 30% is positively associated with governance quality in Asian markets. The study identifies a non-linear relationship between financing structure and governance outcomes. Moderate debt improves governance efficiency, while excessive leverage reduces firm stability. Similarly, equity financing strengthens governance only when ownership is sufficiently concentrated. These findings suggest that optimal financing decisions depend on both institutional conditions and firm-specific characteristics. The analysis further reveals that the disciplinary effect of debt is more pronounced in countries with stronger creditor rights, whereas equity governance benefits are amplified in markets with higher disclosure standards. This research contributes to the literature by integrating financing decisions with governance mechanisms in weak institutional environments, offering practical implications for policymakers and corporate managers seeking to balance risk, control, and performance.
Litong Wang· Advances in Economics, Manag...· 0 citations
This research investigates how liquidity creation induces moral hazard behavior and affects credit quality in Indonesian commercial banks. This study examines the effect of liquidity creation, liquidity risk, and central bank policies on credit risk in Indonesian commercial banks, proxied by the non-performing loan (NPL) ratio. Using panel data from 46 banks listed on the Indonesia Stock Exchange over 2015–2024, we apply the Two-Step System Generalized Method of Moments (SYS-GMM) to address endogeneity inherent in dynamic panel models. Results indicate that liquidity creation has a significant positive effect on NPL, consistent with the moral hazard hypothesis. Liquidity risk (LDR) also significantly and positively affects NPL. Reserve requirements (GWM) and BI-Rate do not produce a direct and significant effect on NPL. Return on assets (ROA) significantly and negatively affects NPL. These results suggest that credit risk in Indonesian commercial banking is predominantly influenced by bank-level intermediation behavior rather than by macroeconomic or policy variables. The research concludes that excess liquidity conditions incentivize aggressive credit expansion without proportionate attention to borrower quality, particularly in an oligopolistic market structure with implicit state guarantees.
Jeffry Fauzan, Dewi Hanggraeni· Eduvest - Journal Of Univers...· 0 citations
