Determinants of Debt Financing for China’s Listed Food Manufacturing Companies
Description
This study uses annual data of Chinese listed food manufacturing companies from 2010 to 2024 as the research sample to systematically examine the determinants of firms’ debt financing costs. Given the industry characteristics of relatively stable production cycles, strong dependence on cash flows, and generally low profit margins, this paper adopts the cost of debt financing as the dependent variable and analyzes the financing effects of share repurchases from the perspective of creditors, focusing on the risk signals conveyed by repurchase activities. The empirical analysis is conducted using panel regression models with province, firm, and year fixed effects. Heteroskedasticity is addressed by employing robust standard errors. To mitigate potential endogeneity concerns, multiple approaches are applied, including propensity score matching combined with fixed effects (PSM-FE), the Heckman two-stage model, lagged variable regressions, and instrumental variable (IV) estimation, thereby enhancing the reliability of the empirical results. The main findings are as follows. First, share repurchases are significantly negatively associated with the cost of debt financing, indicating that firms engaging in share repurchases are able to obtain debt financing at lower costs. Second, mediation analysis reveals that share repurchases reduce debt financing costs by alleviating firms’ financing constraints, with financing constraints playing a significant mediating role in the relationship between share repurchases and debt financing costs. Third, moderation analysis shows that cash holdings significantly strengthen the negative effect of share repurchases on debt financing costs. Specifically, for firms with higher cash holdings, share repurchases are more likely to be interpreted by creditors as credible signals of financial stability and sufficient cash flow. Fourth, further heterogeneity analysis indicates that the debt cost–reducing effect of share repurchases is mainly concentrated among state-owned enterprises, large-scale firms, low-opportunism firms, and firms located in eastern regions of China. Overall, the findings suggest that in the food manufacturing industry—a traditional manufacturing sector characterized by rigid cash flow requirements and stage-dependent operational risks—share repurchases are not only an important internal capital allocation tool, but also an effective mechanism for improving firms’ external financing conditions through signaling effects and the alleviation of financing constraints.
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Institutions
- Lomonosov Moscow State UniversityMoscow, Moscow