*3.1. Data and Sampling Approach*

This study uses samples that are Chinese listed A-share firms on the Shanghai and Shenzhen stock exchanges from 2012 to 2018. The sample period was set between 2012 and 2018. The sample period starts from 2012 to avoid influence of easing monetary measures during the financial crisis from 2008 to 2011. The central bank of China lowered the required reserve and interest rate since 2008, which led to rapid growth of bank credit. In September 2018, the General Office of the State Council announced the "Guidance on Strengthening the Asset-Liability Constraints of SOEs", requiring SOEs to reduce leverage ratio by about two percentage points by the end of 2020. As a result, SOEs have been set annual leverage debt limits by the government, which disrupted the usual debt increment mechanism. Therefore, we exclude samples after 2019. Compared with financial firms, non-financial firms are different in governance and technology features. Following general studies, we first exclude financial firms from our samples. The second sampling stage is intended to exclude special treatment firms (which have made losses for two or three consecutive years) as well as firms with data outliers to avoid any biased estimation. After data screening, a total panel date of 19,822 "firm-year" observations are obtained. All the financial data come from the China Stock Market & Accounting Research (CSMAR) Database and the Chinese Research Data Services (CNRDS) database. The data for this study are processed by Stata15.
