Industrial policy, corporate strategic differences, and debt financing cost

ABSTRACT

Taking the non-financial companies listed on the Chinese capital market in China from 2007 to 2015 as samples combined with the macroeconomic environment faced by enterprises, this paper explores the impacts and functional mechanism of strategic differences on debt financing cost under different levels of industrial policy support. The results show that (1) strategic differences increase the debt financing cost of enterprises, and further research finds that the quality of accounting information, internal controls, and financing constraints play a mediating role in it and (2) the support of industrial policy weakens the impact of strategic differences on the debt financing cost of enterprises, with this phenomenon more apparent in the state-owned, large-scale, and lower-growth enterprises. This paper complements and improves on the related research on the factors that affect debt financing cost and the economic consequences of strategic differences. At the same time, it also provides enlightenment for enterprises to make strategic choices and optimize the allocation of credit resources under the support of different macroeconomic policies.

KEYWORDS:

• Strategic difference
• industrial policy
• debt financing cost
• accounting information quality
• internal controls(IC)
• financing constraints(FC)

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation project of China; under Grant[No.71762024].