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
Date Written: Aug 31, 2018
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
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