Analysis of the Drivers and Effects of Corporate Zero-Leverage Financial Strategy Transformation: A Case Study of Dong'e Ejiao
Abstract
how its zero-leverage strategy shifted between 2018 and 2023 and what drove those changes. Looking at the macroeconomic backdrop, the
firm's ownership structure, and managerial incentives, we find that Dong'e Ejiao kept interest-bearing debt at zero while letting current liabilities rise modestly—a move that stabilized cash flow and helped the company return to profitability after its 2019 loss. That said, zero leverage
is not without costs: forgone tax shields and weakened external creditor supervision are trade-offs worth acknowledging. We close with a few
suggestions for where the company might go next.
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DOI: http://dx.doi.org/10.70711/memf.v3i11.10268
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