Corporate Foreign Bond Issuance and Interfirm Loans in China

47 Pages Posted: 24 Apr 2018

See all articles by Yi Huang

Yi Huang

Graduate Institute of International and Development Studies

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; CEPR

Richard Portes

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: April 2018

Abstract

This paper uses firm-level data to document and analyze international bond issuance by Chinese non-financial corporations and the use of the proceeds of issuance. We find that dollar issuance is positively correlated with the differential between domestic and foreign interest rates. This interest rate differential increases the likelihood of dollar bond issuance by risky firms and decreases the likelihood of dollar bond issuance of exporters and profitable firms. Moreover, and most strikingly, we find that risky firms do more inter-firm lending than non-risky firms and that this lending rose significantly after the regulatory shock of 2008-09, when the authorities sought to restrict the financial activities of risky firms. Risky firms try to boost profitability by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation that limits risk-taking by financial firms.

Suggested Citation

Huang, Yi and Panizza, Ugo and Portes, Richard, Corporate Foreign Bond Issuance and Interfirm Loans in China (April 2018). NBER Working Paper No. w24513, Available at SSRN: https://ssrn.com/abstract=3163280

Yi Huang (Contact Author)

Graduate Institute of International and Development Studies ( email )

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Switzerland

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

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Geneva, 1202
Switzerland

CEPR ( email )

London
United Kingdom

Richard Portes

London Business School - Department of Economics ( email )

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United Kingdom
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+44 20 7000 8401 (Fax)

HOME PAGE: http://faculty.london.edu/rportes/

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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