The Impact of the Belt and Road Initiative on Corporate Excessive Debt Mechanism: Evidence from Difference-in-Difference Equation Model

Abstract

This paper uses the difference in difference (DID) model to explore the impact of the “Belt and Road” Initiative (BRI) on the level of corporate debt and its mechanism based on quasi-natural experiment of the promulgation and implementation. The results indicate that the excessive debt level of enterprises has a hump trend after the implementation of the BRI. The excessive debt level of enterprises shows a hump trend—that is, although the excessive debt level of enterprises in the initial stage of the implementation of the BRI increases to a certain extent, showing a significant downward trend in the middle and later stages. By using the placebo test and DID propensity score matching model to alleviate the possible endogeneity problem, the above conclusion is still robust. The mechanism analysis shows that: during the implementation of the BRI, the government, and financial institutions have increased tax support for companies participating in the BRI, expanded corporate financing sources, reduce corporate financing costs, and increase companies’ demand for funds. As a result, the level of corporate debt has been increases. The conclusions of this paper not only provide micro-evidence for the interaction between the BRI and the micro-behavior of enterprises, but also have certain implications for evaluating the implementation effect of the BRI and subsequent reforms and refuting the “debt trap” of the “Belt and Road” construction from a microscopic perspective.