The Real Effects of Implicit Government Guarantee : Evidence from Chinese SOE Defaults

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)33_Other conference paper

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Original languageEnglish
Publication statusPresented - Dec 2020

Conference

TitleCUHK Shenzhen Online Seminar
LocationOnline
City
Period18 December 2020

Abstract

We study the effects of implicit government guarantee (IGG) on corporate investment by exploiting a series of defaults in China’s onshore bond markets by state-owned enterprises (SOEs)starting in 2015. We find that SOEs reduce their investments by 2.4% of book assets, on average, relative to propensity-score matched non-SOEs in the periods after the first SOE default. The investment reduction concentrates among SOEs with more severe agency problems. SOEs experience more positive market reactions to acquisition announcements after the default events. Our findings suggest that the reduction of IGG alleviates the soft budget constraint problem and disciplines SOE managers.

Citation Format(s)

The Real Effects of Implicit Government Guarantee : Evidence from Chinese SOE Defaults. / Jin, Shuang; Wang, Wei ; Zhang, Zilong.

2020. CUHK Shenzhen Online Seminar, .

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)33_Other conference paper