IWH Bankruptcy Research
IWH Bankruptcy Research The Bankruptcy Research Unit of the Halle Institute for Economic Research (IWH) presents the Institute’s research on the topics of corporate bankruptcy,…
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Ownership Structure and the Cost of Debt: Evidence From the Chinese Corporate Bond Market
Sris Chatterjee, Xian Gu, Iftekhar Hasan, Haitian Lu
Journal of Empirical Finance,
September
2023
Abstract
Drawing upon evidence from the Chinese corporate bond market, we study how ownership structure affects the cost of debt for firms. Our results show that state, institutional and foreign ownership formats reduce the cost of debt for firms. The benefits of state ownership are accentuated when the issuer is headquartered in a province with highly developed market institutions, operates in an industry less dominated by the state or during the period after the 2012 anti-corruption reforms. Institutional ownership provides the most benefits in environments with lower levels of marketization, especially for firms with low credit quality. Our evidence sheds light on the nexus of ownership and debt cost in a political economy where state-owned enterprises (SOEs) and non-SOEs face productivity and credit frictions. It is also illustrative of how the market environment interacts with corporate ownership in affecting the cost of bond issuance.
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Privacy
Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
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Speed Projects
Speed Projects On this page, you will find the IWH EXplore Speed Projects in chronologically descending order. 2021 2020 2019 2018 2017 2016 2015 2014 2021 SPEED 2021/01…
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Projects
Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Gross domestic product
Gross domestic product Gross domestic product (GDP) includes the value of all goods and services produced in an economic area during a specific period of time. It is defined as an…
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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IWH Retreat Kick-off
IWH Retreat: Kick-off Meeting from Oliver Holtemöller, April 19, 2022 Dear all, On 08 and 09 June 2022, our retreat at Schwielowsee near Potsdam will take place. The motto is…
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Trust and Contracting with Foreign Banks: Evidence from China
Desheng Yin, Iftekhar Hasan, Liuling Liu, Haizhi Wang
Journal of Asian Economics,
December
2022
Abstract
We empirically investigate whether firms doing business in regions characterized as having high social trust receive preferential treatment on loan contractual terms by foreign banks. Tracing cross-border syndicated lending activities in China, we document that firms located in provinces with higher social trust scores obtain significantly low costs of bank loans and experience less stringent collateral requirement. To address the potential endogeneity issues, we adopt an instrumental variable approach and a two-sided matching model, and report consistent results. We also estimate a system of three equations through three-stage-least square estimator to accommodate the joint determination of price and non-price terms in loan contracts. In addition, we find that the effect of social trust on cost of bank loans is more prominent for firms located in provinces with relatively less developed formal institutions.
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