Cash flow volatility, leverage and debt maturity

What is it about?

This paper investigates the influence of cash flow volatility on firm’s leverage levels. It also analyzes how cash flow volatility influences the debt maturity structure for the Chinese listed firms.

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Why is it important?

Existing empirical literature regarding the influence of variability of cash flows on leverage and debt maturity structure is inconclusive. Moreover, prior research studies mainly focus only on the developed countries. No previous comprehensive study exists so far for Chinese firms in this regard. This paper endeavors to fulfill this research gap by furnishing novel findings in the context of atypical and distinctive institutional setup of Chinese firms. The findings of this study can be helpful for the financial managers in maintaining optimal leverage and debt maturity structure,for lenders in reducing their risk of non-performing loans and for investors in their decision-making process.