Liquidity and default risk in China: The double-edged role of state ownership

Zhao, L; Mollica, V; Shen, Y; Liang, Q

Liquidity and default risk in China: The double-edged role of state ownership

Zhao, L Mollica, V Shen, Y

Liang, Q

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Pacific-Basin Finance Journal, 2026, 95, pp. 102998
Issue Date:: 2026-01

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Field	Value	Language
dc.contributor.author	Zhao, L
dc.contributor.author	Mollica, V
dc.contributor.author	Shen, Y https://orcid.org/0000-0002-1924-1301
dc.contributor.author	Liang, Q
dc.date.accessioned	2025-12-08T05:22:16Z
dc.date.available	2025-12-08T05:22:16Z
dc.date.issued	2026-01
dc.identifier.citation	Pacific-Basin Finance Journal, 2026, 95, pp. 102998
dc.identifier.issn	0927-538X
dc.identifier.uri	http://hdl.handle.net/10453/190874
dc.description.abstract	This study explores the impact of stock liquidity on firm default risk in China, focusing on the moderating role of state ownership. The empirical results confirm that enhanced liquidity decreases default risk; however, the interaction of state ownership weakens this relationship. Notably, state ownership strengthens the informational efficiency channel (the learning channel) but weakens the corporate governance channel, with the latter effect outweighing the former. The findings highlight the dual role of liquidity in reducing default risk and emphasize the implications of state ownership in shaping this relationship. These findings contribute to the literature on financial risk management and provide policy implications for improving corporate governance in state-controlled economies.
dc.language	en
dc.publisher	Elsevier
dc.relation.ispartof	Pacific-Basin Finance Journal
dc.relation.isbasedon	10.1016/j.pacfin.2025.102998
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.subject.classification	3502 Banking, finance and investment
dc.title	Liquidity and default risk in China: The double-edged role of state ownership
dc.type	Journal Article
utslib.citation.volume	95
utslib.for	1501 Accounting, Auditing and Accountability
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Business School
pubs.organisational-group	University of Technology Sydney/UTS Groups
pubs.organisational-group	University of Technology Sydney/UTS Groups/Centre for Climate Risk and Resilience (CCRR)
utslib.copyright.status	open_access	*
dc.rights.license	This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0). To view a copy of this license, visit https://creativecommons.org/licenses/by-nc-nd/4.0/
dc.date.updated	2025-12-08T05:22:15Z
pubs.publication-status	Accepted
pubs.volume	95

Abstract:

This study explores the impact of stock liquidity on firm default risk in China, focusing on the moderating role of state ownership. The empirical results confirm that enhanced liquidity decreases default risk; however, the interaction of state ownership weakens this relationship. Notably, state ownership strengthens the informational efficiency channel (the learning channel) but weakens the corporate governance channel, with the latter effect outweighing the former. The findings highlight the dual role of liquidity in reducing default risk and emphasize the implications of state ownership in shaping this relationship. These findings contribute to the literature on financial risk management and provide policy implications for improving corporate governance in state-controlled economies.

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http://hdl.handle.net/10453/190874