Study of the Nonlinear Effect of Debt Leverage on Household Financial Asset Allocation

Abstract

Using data from the China Household Finance Survey (CHFS), this paper investigates whether there is a nonlinear effect of debt leverage on households' financial asset allocation. The study shows that debt leverage affects households' motivation to participate in the financial market and leads to a reduction in the efficiency of financial asset allocation, with a certain nonlinear effect on low-debt households. Further, this paper provides policy recommendations to address the issue of reducing the impact of debt risk on residents' asset allocation, which is important for realizing the growth of household wealth.