China’s Anti-Corruption Campaign and Credit Reallocation from SOEs to Non-SOEs
59 Pages Posted: 1 Feb 2017 Last revised: 9 Nov 2017
Date Written: October 1, 2017
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
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