Global value chain and firms leverage: The mediator role of foreign ownership

This paper investigates the effect of participation in the global value chain on leverage dynamics by using novel matched Chinese firm data and the moderating role of foreign ownership. This paper shows firms with higher upstream may reduce leverage degree, and foreign firms' leverage reduces more. In addition, the effects show heterogeneity among areas and industries. We test the mechanism by adopting foreign ownership entry shock and the value-added ratio. The policy implication is straightforward the climbing of the global value chain and foreign ownership attraction can maintain the leverage risk for developing countries.