Economic Policy Uncertainty, State Ownership, and Credit Allocation

52 Pages Posted: 25 May 2018 Last revised: 15 Jan 2020

See all articles by Yiping Huang

Yiping Huang

Peking University

Yang Ji

Xiamen University - School of Economics

Xiaoran Ni

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Xiamen University - School of Economics

Yuyan Tan

Peking University

Xu Wang

China Industrial Bank (CIB) Research

Date Written: January 15, 2020

Abstract

Employing the news-based economic policy uncertainty (EPU) Index of Baker, Bloom, and Davis (2016) and quarterly data of Chinese listed companies, we find that an increase in EPU raises the average debt-to-asset ratio of state-owned enterprises (SOEs) but lowers that of private-owned enterprises (POEs). Further evidence supports the view that in reaction to a heightened EPU, banks tend to allocate credit resources toward firms with implicit guarantees against default. Our findings highlight that EPU can reduce real efficiency through worsening credit misallocation.

Keywords: Economic policy uncertainty; State ownership; Credit allocation; Corporate leverage

JEL Classification: G32; E44; P26

Suggested Citation

Huang, Yiping and Ji, Yang and Ni, Xiaoran and Tan, Yuyan and Wang, Xu, Economic Policy Uncertainty, State Ownership, and Credit Allocation (January 15, 2020). Available at SSRN: https://ssrn.com/abstract=3177982 or http://dx.doi.org/10.2139/ssrn.3177982

Yiping Huang

Peking University ( email )

Beijing, 100871
China

Yang Ji

Xiamen University - School of Economics ( email )

China

Xiaoran Ni (Contact Author)

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

D 204, Economics Building
Xiamen, Fujian 361005
China

Xiamen University - School of Economics ( email )

China

Yuyan Tan

Peking University

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Xu Wang

China Industrial Bank (CIB) Research ( email )

China

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