Author(s)

Haitao Wu ¹

Affiliation(s)

¹ School of Economics, Guangxi University, Nanning, 53000, China

Corresponding Author

Haitao Wu

ABSTRACT

Through studying the annual data of 11 years of financial statements of A-share listed companies on the Shanghai Stock Exchange from 2011 to 2021, it is found that there is a negative correlation between the leverage ratio of enterprises and the return on total assets. Furthermore, from different dimensions, changes in leverage ratio have a negative impact on the total asset return of enterprises, but the degree of impact varies. Among them, commercial credit leverage has a much smaller negative impact on the total asset return than other dimensions, while bank leverage has the greatest negative impact on the total asset return. Deep level surveys have shown that companies with better financial flexibility can generate positive feedback on their operational performance through the increase in short-term leverage and commercial credit leverage, thereby offsetting the negative effects of changes in leverage ratios to some extent. For high-tech enterprises, an increase in long-term leverage ratio will lead to a further decline in business performance. The policy implication of this paper is that while stabilizing the macro leverage ratio, the relevant departments need to expand the financing channels of enterprises, increase financing options, provide credit support, provide moderate leverage space, guide enterprises to choose appropriate debt financing methods based on their own development characteristics, financial flexibility and development prospects, so as to promote finance to better serve the real economy To empower economic development.

KEYWORDS

Leverage ratio; Operating Performance; Financing channels; Financial flexibility; Development prospects

CITE THIS PAPER

Haitao Wu, The Impact of Corporate Leverage Ratio on Its Operating Performance: An Empirical Study Based on A-share Listed Companies on the Shanghai Stock Exchange. Accounting and Corporate Management (2023) Vol. 5: 128-137. DOI: http://dx.doi.org/10.23977/acccm.2023.051019.

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