Firm Performance in China: An Analysis of the Interplay between Financial Leverage, Firm Liquidity, and Firm Size

Abstract

Purpose: The aim of this research is to investigate the association between financial leverage, firm liquidity, and firm size with the performance of companies in China. Design/Methodology/Approach: The study adopted a quantitative approach and gathered secondary data from 2010 to 2022 from firms listed on the China Stock Exchange via the wind database. Using a fixed effect model, we empirically tested our hypotheses. Findings: The study's outcomes indicate that firm liquidity and firm size significantly affect a company's performance in China. Moreover, the study claims that financial leverage also plays a significant role in influencing firm performance. Conclusion: In conclusion, findings indicate the importance for corporate managers, policymakers, and investors to consider factors such as financial liquidity and firm size when making decisions related to firm performance, particularly in an emerging stock market. Implications/Originality/Values: These findings have important implications for corporate managers, policymakers, and investors. Corporate managers, investors, and policymakers should focus on policies that promote financial stability and economic growth. Overall, this study provides valuable insights into the factors that influence firm performance in China.

Keywords

• Firm’s performance
• Financial leverage
• Firm liquidity
• Firm size