China’s Anti-Corruption Campaign and Credit Reallocation from SOEs to Non-SOEs

59 Pages Posted: 1 Feb 2017 Last revised: 9 Nov 2017

Bo Li

Tsinghua University - PBC School of Finance

Zhengwei Wang

Tsinghua University - PBC School of Finance

Hao Zhou

Tsinghua University - PBC School of Finance

Date Written: October 1, 2017

Abstract

We provide a novel empirical finding that the recent anti-corruption investigations in China are associated with credit reallocation from less productive state-owned enterprises (SOEs) to more productive non-SOEs, indicating that the competition effect dominates the contagion effect for non-SOEs within affected industries. The credit shift is more significant for bank loans (vs corporate bonds), extensive margin (vs intensive margin), and short-term debt (vs long-term debt), which is consistent with a supply-side explanation corroborated by an exogenous shock to the banking industry. Although recent literature documents a negative financial impact of China’s anti-corruption campaign, our findings point to a particular positive channel due to more efficient credit reallocation.

Keywords: Anti-corruption, competition, contagion, credit reallocation, financing capacity, political risk

JEL Classification: G30, G32, G34, P26

Suggested Citation

Li, Bo and Wang, Zhengwei and Zhou, Hao, China’s Anti-Corruption Campaign and Credit Reallocation from SOEs to Non-SOEs (October 1, 2017). PBCSF-NIFR Research Paper No. 17-01. Available at SSRN: https://ssrn.com/abstract=2908658 or http://dx.doi.org/10.2139/ssrn.2908658

Bo Li (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China
+86 10-627982146 (Phone)

Zhengwei Wang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China

Hao Zhou

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China
86-10-62790655 (Phone)

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