Ownership Structure and the Cost of Debt: Evidence from Chinese Corporate Bond Market

36 Pages Posted: 19 Feb 2019

See all articles by Sris Chatterjee

Sris Chatterjee

Fordham University - Gabelli School of Business

Xian Gu

Durham University Business School

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Haitian Lu

Hong Kong Polytechnic University

Date Written: February 04, 2019

Abstract

We study how firms’ ownership structure affects the cost of debt using evidence from Chinese corporate bond market. Our result shows state, institutional, and foreign ownership all help to reduce firms’ cost of debt. The effect of state ownership is more pronounced if the issuer is headquartered in stronger marketized provinces, operates in industries less dominant by state asset, and after the Party’s anti-corruption campaign. Institutional ownership matters more in low marketized environment especially for lower quality firms. Our evidence sheds light on the ownership-cost of debt nexus in a political economy where state and private firms face productivity and credit frictions, and how market environment interacts with corporate ownership on the cost of bond.

Keywords: government ownership, institutional holding, credit spreads, market force

JEL Classification: G12, G14, L14

Suggested Citation

Chatterjee, Sris and Gu, Xian and Hasan, Iftekhar and Lu, Haitian, Ownership Structure and the Cost of Debt: Evidence from Chinese Corporate Bond Market (February 04, 2019). Available at SSRN: https://ssrn.com/abstract=3336609 or http://dx.doi.org/10.2139/ssrn.3336609

Sris Chatterjee

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

Xian Gu

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Haitian Lu (Contact Author)

Hong Kong Polytechnic University ( email )

School of Accounting and Finance
Hung Hom
Hong Kong

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