Revealing the Default Risks in MSMEs Financial Leasing: Identification and Underlying Mechanism

Abstract

ABSTRACT We explored the default risk of small and medium-sized financial leasing businesses in China based on real transactions of a Chinese financial leasing company from 2018 to 2021. The results show that there is a negative relationship between the financing scale and the default risk of lessee companies. The management cost of financial leasing business moderates the relationship between the business scale and the risk of overdue default. In addition, the improvement of industry competition is expected to select financially sound MSMEs for lessees. These enterprises have demonstrated higher risk resistance in obtaining large-scale financial leasing services. We provide novel insights into the risk management of Chinese financial leasing companies and offer policy recommendations for regulation and development.