This paper takes the 2004-2016 non-financial listed companies on Shanghai and Shenzhen stock exchanges as research samples, combined with urban and macro-level data about land use right transfer in prefecture-level cities, and tries to capture the intrinsic link between land finance and leverage of non-financial listed companies. The study finds that the increase in local governments' reliance on land finance will increase the probability of corporate overleverage. In the case of introducing control variables that may interfere with the estimation results and using instrumental variables to alleviate the potential endogeneity, the conclusion remains robust. On this basis, this paper further studies the relationship between land finance and corporate solvency and sustainable development capability. It finds that the increase in reliance on land finance will increase the company's short-term solvency risk and future solvency pressure, while reducing the profitability and sustainability of overleveraged companies. This phenomenon is particularly evident in high-leveraged companies such as real estate companies in regions with lower collateral value, state-owned enterprises, and enterprises in the eastern region. This paper provides a new perspective for further understanding of the high leverage among non-financial enterprises and the prevention and resolution of debt risks in the context of China's supply-side structural reform.
Keywords: land finance, corporate leverage, excessive debt, debt risk
China Finance and Economic Review
Volume 8 Number 2 Summer 2019.P68