Political Connections and Credit Allocations: Evidence from China’s State-owned Enterprises in Urban Land Market

65 Pages Posted: 28 Aug 2017 Last revised: 5 Oct 2018

See all articles by Long Wang

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management

Yang Yang

The Chinese University of Hong Kong - CUHK Business School

Date Written: Aug 31, 2018

Abstract

This study examines the underlying mechanisms that drive the price premiums State-owned Enterprises (SOEs) pay at land auctions using a comprehensive and representative dataset of 316,320 transactions of land use rights from 2000 to 2016 in approximately 2,300 counties of urban China. We nd that the SOEs paid 9.65% more than their Private-owned Enterprises (POEs) counterparts for comparable land parcels at auctions, and the land quality can largely explain the price premiums SOEs pay. In addition, SOEs' soft budget constraint enables them to overbid for the lands they desire, and SOEs even bid higher prices for land after the Economic Stimulas program. Lastly, we show that SOEs' monetary wealth and political connections crowd out POEs in areas with quality land.

Keywords: Land Value, Political Connection, Auctions, Economic Stimulus Program, Crowd Out Effect, Land Market in China

JEL Classification: R14, D44, P26, E50, C1

Suggested Citation

Wang, Long and Yang, Yang, Political Connections and Credit Allocations: Evidence from China’s State-owned Enterprises in Urban Land Market (Aug 31, 2018). Available at SSRN: https://ssrn.com/abstract=3025696 or http://dx.doi.org/10.2139/ssrn.3025696

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management ( email )

No.393 Middle Huaxia Road
Pudong district
Shanghai, AK Shanghai 210201
China

Yang Yang (Contact Author)

The Chinese University of Hong Kong - CUHK Business School ( email )

7/F, Cheng Yu Tung Building
12 Chak Cheung Street, Hong Kong
Hong Kong
Hong Kong

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